Secret formula to optimize KOTOR (without mods)

Right click swkotor.exe to set compatibilty mode to Windows XP (Service Pack 3) and add DPI override for this application.

Go into game and set resolution to 1024x768, reset game and the game will look as it was intended on original 4:3 hardware.

Go in swkotor.ini file and put Anisotropy to 16, Anti Aliasing to 8, Soft Shadows off with 0, and turn off Frame Buffer with 0.

Optional:
Playing this game with only one monitor or having your other monitors disabled seems to have less breaking when you Alt+Tab so I manually disable my second monitor in Windows before each time I play.

You can disable movies in the swconfig.exe to skip the loud intros for Bioware & LucasArts, it keeps the cutscenes from the story intact and just skips the intro.

In swkotor.ini you can disable certain autopause settings to have a faster, less interrupted gameplay experience. My personal recommendation is turning off Mine Sighted & Enemy Sighted since your game will be autopausing so much in certain parts it can be unsettling and kind of annoying.