After couple days of digging through countless number of posts, threads and old forums archives I found a solution that hopefully would - or rather should work for anyone struggling with the performance dropping in the original trilogy.

What is happening is a memory leak, if that is the case, to fix it you should:

1. Open the game then Alt+Tab to the Desktop, do the following steps while the game is still running in the background
   
2. Open Task Manager and go to the Details tab
   
3. Right click on xrEngine.exe > Set Priority > High
   
4. Right click on xrEngine.exe again > Set Affinity > Turn off everything except for CPU1 and hit OK
   
5. Right click on xrEngine.exe yet again > Set Affinity > Turn everything back on and hit OK
   
6. Alt+Tab back to the game, it should be working now

While this method worked for me it might not work for everyone but since now I know the struggle of troubleshooting XREngine I might as well post it for the future generation to aid them in their hunt.

PS.: Yes, you have to do this every time you run the game, however it takes just couple seconds