This thing ran really good before we started texturing everything. I think if you took all the textures and combined them into an atlas you could get the performance back without doing anything else.
What's funny is that the timedemo actually had lower performance then when I was playing. Even recording the demo cut my speed by 1/2. I haven't looked, but maybe lowering the texture res would help too.
@The happy friar: you can use a decal 'soft shadow' material and put it where the shadow volumes are cast. The shadows will be correct, but the weapons/models won't recive shadows since the light it's not casting them in fact. (I presume that you disabled the shadows cast later, right?)
Thanks for the file, I'll give it a shot.
The lightmaps+RT idea I got from BerserkerQ2. It uses pre-compiled Quake 2 lightmaps and it uses real time lights. It makes outside scenes look very good because you can do the colored ambient light, sun light, etc. and use the RT stuff for weapon projectiles, lights that would interact with entities, etc (that engine mod has unified lighting like D3).