I suggest doing a test to see if each zombie is culled before you animate it, using EntityCulled(). That way the engine doesn’t have to calculate all the matrices for offscreen zombies. If there is any noticable delay, I can add a pre-render entity callback during which animation could be performed. My guess is right now your limiting factor is the animation of all those zombies, because the program slowed down as I got dozens and dozens of the little buggers, even when they were offscreen.

You might want to increase the shadowmap offset of the flashlight. It seems to get a little shadow acne at times. Increasing the shadowmap resolution will also do this, but the shadows already look pretty sharp.

Entity colors are unique per entity, even with instanced stuff, so you might be able to do something clever with the zombie pixel shader using colors. I don’t think colored zombies are a good idea, but maybe parts of the texture can be colored, using an alpha channel to control the influence. Then you could have a range of green and brown zombies, at no extra cost.

As I said, lots of people have notebooks that are capable of beautiful graphics. Why on earth should anyone need better card for this: http://www.gameproducer.net/2009/02/14/screen-brightness-what-a-nasty-thing/
That sucks.