Peds and traffic would be very difficult to sync properly aswell as taking a shitload of bandwidth....

GTA1 and 2 had them because rockstar built multiplayer into the game, so they have access to anything and can change how peds etc work. Using a 3rd party mod (like this) it'll be extremely difficult if not impossible to get perfectly.

Yeah, I tought so...
But what if making peds random on each client, meaning they wouldn't be synced, and sync only some traffic.
For example generating and syncing some cars in the vicinity of players. Their average quantity could be customized...
Let's say that means some 10-15 cars in the vicinity of the players... How much bnadwith would that take?

Well, I for one would like to see a living city... Complete with pedestrians and traffic.
For me it's not quite fun to chase 2-3 friends in a big dead city.
I know it's demanding but i think if it's done correctly it's possible. It was in GTA and GTA2.
Maybe you could define vicinity zones (with customizable distances for slower PCs) around players to generate and sync traffic.
Or you could also put random pedestrians in, but not sync them (meaning every client would have random pedestrians and in different quantities around them, even if their zones overlap), and just sync traffic.
And you could put it in as an option, open to high bandwith LAN games...
That would rock