I run a P4 3.0ghz oc @3.4, 2 Gb DDR400 and a 7800GS+ 512Mb GC. However on games such as Test Drive unlimited I run it at 1280x1024 + 4x aa. Looks bloody lovely. However when I go into a built up city the frames can drop from 50 to 15fps. Obviously i'd like to increase this by dropping the settings. I tried turning off the AA and dropped the resolution to 1024x768 and I get exactly the same FPS, even after running Fraps. Also this is the same for Far Cry and Quake 4. It's really weird. I haven't long finished re-building my PC and have all the latest drivers loaded etc.  
 
This happened a while ago but have never got to the bottom of it.
 
Any ideas!

You are likely hitting a CPU not GPU wall.
 
There is not likely much you can do.
Perhaps make sure that any extra software is not running such as AV which could be taking cycles.

Maybe, how can I test if the CPU is bottlenecking the GPU?

This typically means that your CPU is at it's max.  The if dropping from a high resolution to a low resolution doesn't help your FPS, the video card is not typically the problem.  There really isn't much you can do about this either, as you are already OCing.
 
Is this a fresh install of Windows and reinstalled video drivers?  

I re-installed WinXP around 3-4 weeks ago and installed all the latest drivers incl motherboad etc. I wouldn't have thought a P4 oc @ 3.4 would bottleneck a 7800 series video card. But I may well be proved wrong. I don't have any AV running in the background while playing games etc.
 
Thanks so far.

It does seem a little wierd.  I used to have a A64 3200 with a 7800gs AGP and it didn't seem to have a problem with Quake Wars (which used the Q4 engine).  I didn't use any AA and had the resolution set to 1280x1024.  I never checked what FPS it was getting, but it was definately above 15 fps all the time.  I would think that our CPUs had similar performance.
 
Is this new, or did it use to run fine before you reinstalled windows?

The drop occurs because the more objects there are on the screen, the more work there is for the cpu (gpu can virtually put up with lots of objects at a time given rendering quality). Getting even a cheap dual core will help a lot. It'll help the fps drop a lot
but won't increase the maximum fps by much.