I had a lot of problems with flickering NPCS (including the model of Kyle in 3rd person mode) before and was told this was down to having too many NPCs in the level at once - there were a lot you couldn't see (so FPS was fine) but they were all over the place because it was an open level. I've closed the level in a lot, which means for each area of street I can spawn a number of NPCs there and then. This means there are never more than 20 or 30 NPCs in the level at once, absolute maximum. However, I've just compiled the level and all the entieis includingthe NPCs are still flickering!
This includes func_door and func_breakables.

I have a lot of custom textures in the level, and quite a few entities in total (912). There are a good few models (mostly small) of things like books, glasses etc.

Any ideas what I can do to get rid of this flickering?

well, i don't have any suggestions, but i ran into the problem a little while ago...i was doing a city level too...heh...all buildings were fully accessable, the level was huge and lagged like heck. i abandoned the level because the lighting required too much memory and it was too laggy to be worthwhile, so my advice is reduce the detail of the level just enough to stop the entities from flickering. i don't know of any other way to do it

It might have to do with how you build your maps. I'd have to look at the map file to test my theory.

Yeh I think you're right, I got rid of a lot of models (books, bottles that kind of thing) and the flickering is mostly gone, but i can still go over the limit and back into flickering. Hard balancing act, I don't want the level to be too easy, but too many NPCs and it will flicker, I don't want a lack of detail, but too many models and it will flicker...I hate compromising!