Come on, do you really expect Warhorse to make a city with tens of thousands NPCs each with their own intricate routine? No one needs that.
A combination of different tiers should do the work. Complex AI for plot-relevant characters, less complex Gothic 2-tier AI for merchants, and simplistic AI for extras to fill out the space and make Prague a believeable city.
Now, why Warhorse still reused their CPU-taxing AI for soldiers that appear during setpiece battles such as the siege of Talmberg instead of dumbing it down is a mystery to me.
I specifically said streamlining is necessary. But even cutting it down to a mere 1000 would be likely impossible and any lower you're risking the Whiterun effect from Skyrim - a supposedly majestic metropolis of the empire feeling like a dingy backwater hamlet.
As for the tiers, not sure how much that would help. Even simplistic NPCs still need to react to the PC killing and stealing, still need a day/night cycle and at least some basic routine. Meaning you wouldn't save much.
As for the last point, are you sure that's the case? Citation needed.