With lots of characters you'll probably want to have lower poly characters. Also LOD will be a big help.
There's some kind of bone animation shader floating around the forums that people are claiming increases graphics performance also.
Instancing has no effect on frame rate. However you might speed up your load times using it. At least use clone object otherwise.
As far as how many polys your characters should have, it really depends on the situation. A typical high quality character will probably have around 2000-3000 polys. DBP has been around a long time so "high quality" has changed over the years. Animating an army? You might drop that to 200-300. Try to keep the game below 50000 on-screen polygons as a rough measure.
Here's a direct comparison of polygon counts:


This character head is roughly 1000 polys.


This earlier version is roughly 300 polys with the same texture.


This is an older image showing the older face. The entire character is about 1900 polygons.
Being efficient and knowing how to position vertices and faces is very important. A lot of times you can reduce poly count a little and keep the same detail level. Also good positioning helps when animating. I'll leave it for someone else to explain this in more detail if there is interest.