Just thinking out loud here, haven't really got a chance to test this theory. But what if the color texture already has a pretty dark/near black texture? Then multiplying the AO into the diffuse won't amplify the dark effect that much. In that case you ought to benefit more from multiplying a separate AO map into the…
Ben> Ah I see. Well I have a talented programmer co-worker who is prototyping 3D-features and he demonstrated how the AO "should be used" for me. :) And I gotta say it does look sweet. But I think as you pointed out it does take a performance hit, but we're on pretty pimp hardware. Not sure how big of a performance hit…