-in the pseudo-server idea: if i am trailing a infernus, and then i enter another persons bubble, and they become pseudo-server, then i will stop seeing what i was and the inernus will disappear from my screen.
Umm... If your trailing somthing it will just be going around circles and you will not end up going into another "zone" but I think your idea is very good and would probly be the best working one.
ok now for my oppinion witch has been kinda stolen and edited from other peoples posts...
1) there are only around 50 - 100 cars/peds every where at one time that are all synced (cant spell) this could generate lag but not as mych as everything being synced.
2) when you are at a place in the city you will have "synced trafic" and when u leave it it will disapear, basicaly the same as your viewing distance in singleplayer. if 2 people can see one area, both will be able to see what evers in that area. If people are in a cornet of a map the 3 other corners and middle will be empty.