Turns out the patch for 1.1 breaks quad core support. The game can't handle 4 cores anymore. So if you have a quad core pc and you install the latest patch the game will start crashing. There are instructions on how to fix this.
Open up the fallout.ini file in: My Documents\\My Games\\Fallout3
Find the line:
bUseThreadedAI=0
change it to:
bUseThreadedAI=1
Add another line after it and insert:
iNumHWThreads=2
This will limit the game to 2 cores and prevent the engine bug from causing the game to freeze.