Let's run the game's launcher and set up the basic settings.

- Under Options set your resolution (e.g. 1920x1080) and choose Ultra for the graphics quality, but then set antialiasing to Off and also click Advanced and uncheck Transparency Multisampling. Fallout 3's built-in anti-aliasing is pretty bad and we will be forcing a better method through an external app.

- Under Files tick all the DLC's. They're not enabled by default.

Now exit the launcher.

This is the most important tweak as the game will be constantly crashing without it.

- Go to Documents\My Games\Fallout3\, find the FALLOUT.INI file, open it in Notepad.
- Replace bUseThreadedAI=0 with bUseThreadedAI=1
- Then add an extra line right below it and type iNumHWThreads=2

We're not yet done with FALLOUT.INI. Find the [Controls] section and add the following lines to it:
fForegroundMouseAccelBase=0
fForegroundMouseAccelTop=0
fForegroundMouseBase=0
fForegroundMouseMult=0

This will remove the annoying mouse lag/input delay. Now save the changes and close the file.

Fallout 3 is a 32-bit application and can sometimes run out of memory. However, applying the 4GB patch[ntcore.com] will expand its memory space from 2 to 4GB, which should prevent the majority of crashes. Simply download the program and choose Fallout3.exe when prompted. If you're not sure where it is, you can right-click on the game in your library -> manage -> browse local files.

Now we just need to limit the game's frame rate to 60 fps (as the physics start breaking once you exceed 60 fps) and force a better anti-aliasing method. We'll be using Nvidia Profile Inspector for this, which you can get here:
https://github.com/Orbmu2k/nvidiaProfileInspector/releases

Find the Fallout 3 profile and then set the following:
Antialiasing compatibility: 0x000010C1 (just copy and paste this)
Frame Rate Limiter V3: 60 FPS
Antialiasing - Mode: Override any application setting
Antialiasing - Setting: 4x [4x Multisampling] OR 8xQ [8x Multisampling]
Antialiasing - Transparency Supersampling: 4x Sparse Grid Supersampling OR 8x Sparse Grid Supersampling

Make sure to click Apply changes before closing the app.

And that's it. Enjoy the game!