You're not doing something wrong, GTA 4 is just stupid that way. I've tried countless times to get the amount of taxi's to an acceptable amount without performance taking any damage (with no luck).
The best thing you can do is turning the traffic density down to 20 (or lower). Then just install any of those fixes. I've had the most luck with traffic control (system) I think, might be a different one because I tried so many. You might also want to try one of those lightweight car packs (they usually come with a fix along with em). Keeping the size of your vehicles.img as low as possible certainly does seem to help a bit.