Originally posted by letsTPKothers:

Or is it just the terrain altering?
I have done some testing to an extent, and have found it does effect FPS to some degree with smaller structures, I'm just not sure about the larger scale stuff, like giant river bridges, etc.

In our experience the worst cases where there's above 10k instances in a given area are caused by in no particular order.

Terrain deforming/digging/leveling.
Warehouses/chests
Portals
Large structures, esp many structures close together.

My advice is spread out abit.. portal areas don't need to be near the town.. they can on top of a mountain.. you portal there afterall..

Break up your smithy and your cooking areas.. to reduce lag.. make a seperate area for smelting.. etc.. and you should be able to keep instances down to 8k or less. 2-5k is ideal.