When I do urban encounters, I mostly do #3 during the day (and hope it makes travel interesting) and then create a feeling of danger at night with a second table that is more - but not completely - geared to "things that might want to just attack you on sight". I mean it is a city, life and death combat are not a daily thing or no one would live in it.
During the day, I create conflict by rolling twice on the table and then trying to imagine a conflict between the two entries that the players come across in normal city life. If one party doesn't particularly inspire me at the moment, I'll have that party flee and deposit the "problem" that I am inspired by in the PC's lap. I also like to have the encounters draw the party into the setting.
I think the ideas are about right, as long as it is clear that none of them are necessarily, "You see this; roll for initiative" type encounters. Even Ibn Natn's people - maybe especially Ibn Natn's people - would be very circumspect, probably the point of officious politeness and cowardice, if challenged abroad in daylight as opposed to in the Charnel Quarter.
Some other very rough bare bones ideas, not really fleshed out:
1. A servant of the House of Mash’al is frantically seeking a rare delicacy that an important guest insists on having.
2. A group of salamanders in the employ of Hadiya Rafidah Kassis are drunkenly imbibing high proof alcohol and explosively spouting blue flames in the street.
3. A mixed group of servants of Ibn-Natn have reason to conduct business with a shop keeper that can only be done in the daylight.
4. A group of street urchins in the employ of the Coiled Madam look for easy pickings in the purses of strangers of the city.
5. A tout offers for a small fee to show the PC the wonders of the city? He hints that he knows where various pleasures both licit and illicit can be found.
6. A party of human lepers goes down one side of the street begging. Everyone presses against the far wall to give them right away. Some toss coins. Others toss rotten vegetables. Both are taken.
7. A beggar attempts to gain the PC’s sympathy with a story of woes and misfortunes. Ninety percent of the time, these are professional beggars. The other 10% of the time, it’s someone in real desperate need of aid.
8. A busker juggles flaming torches, while an intelligent monkey performs tricks and attempts to convince passers by to put money in a hat.
9. A busker snake charmer’s small traveling circus performs various stunts with supposedly vicious snakes - who actually of course can talk, and are in on the act.
10. A group of magicians plays literally enchanting music on a street corner, hypnotizing the weak willed that come near. They entertain the rest of the crowd by making ridiculous suggestions to the enraptured bystanders.
11. A professional eavesdropper snoops around for interesting conversations to memorize. He tries to sell his merchandise to the PCs.
12. Barakaka the ooze mephit is running a message or an errand for his master Al Marbi. He takes every opportunity to harass comely females with profane and vulgar observations, and delights in provoking return barbs, retorts and even blows and missiles as a sort of bizarre game.
13. An apprentice of Gamali Al Zuhur is seeking some rare item for his master’s greenhouses.
14. A group of the Chimney Sweeps trails the PC’s on the roof tops attempting to learn what errand they are on.
15. A great wagon pulled by mastadons, dire oxen or the like, tries to pull a tottering load of building supplies (logs, bricks, stone blocks, ect.) down a street seemingly far too narrow for the transport, causing much consternation.
16. A group of Fire bug toughs try to intimidate everyone in the street in to giving way to them and treating them as some sort of nobility.
17. Several ogres and some of Beyg Tuma’s tax collectors are on the trail of a tax cheat, when they PC’s come to their attention. They seek proof that the PC’s paid a ‘sword tax’ upon entering the city, and if not what a fine paid for every bladed weapon the PC’s possess.
18. A group of the Tuma children are out on an educational excursion in the city, such as to witness the parade of a particular Guild, or to see the once a century blooming of a rare plant in the hanging gardens - accompanied by a nurse, several servants and a dozen burly body guards.
19. Two aged philosophers go down the street at a surprisingly quick pace, paying little attention to their surroundings, so caught up are they in a heated argument over the merits of two political parties.
20. A group of young scholars are playing at being dangerous rakes and rascals as they escape from their studies.
21. A starving poet tries to convince the PC’s to commission him to write poems about their good deeds and wander about the city reciting them.
22. Two elders of the city are on their way to a tea house for afternoon refreshment, and are discussing with each other the details of a particularly vexing case heard in the court of elders this morning.
23. A group of the Chimeras are people gazing on the street corner, looking for opportunity to stir up some trouble. They entertain themselves by having a buddy, an intelligent lion, pretend to be a wild animal that has escaped their control, snarling and chuffing and panicking the naive.
24. The Liberators are trying to spirit a slave out of the city, closely pursued by the city watch. There is a 20% chance in the excitement the slave has now decided that they don’t really want to be rescued, and is trying to convince his would be rescuers to let him go before he gets into trouble.
25. A group of stone giants is dragging a sledge of stone to a construction site. They are all convinced they are having a living dream, and nothing that happens here under the sky is real.
26. The glassblowers of the city are engaged in festivities, and are having a parade. They throw beads and small coins at onlookers, and parade examples of their art, the sacred relics of their guild (in stained glass reliquaries), various glass idols of their deities, ancestors, and greater spirits, about the city. They are all dressed in elaborate finery, including coats sewn with hundreds of tiny mirrors and pieces of glass. Their apprentices sing sacred hymns of the Guild, while the Journeyman make merry with bottles of wine and caper in the streets, or show off their skill by juggling various glass objects (such as balls and empty bottles of wine). Various citizens come out to give or receive blessings, and street urchins, bored talking animals, and buskers follow behind in their wake.
27. A young man with a restless character has just been discharged from the honorable waifs of the palace. He goes forth to seek adventures and his fortune. The PC’s seem like a likely place to begin, and he tries to convince one to take him on as a squire or apprentice.
Looking over the list of major NPCs, it impresses upon me how thin it is. There's only about 1/4 the NPC's I feel you'd need to truly understand a city of this size, and I have given no examples of ordinary street persons - no shopkeepers, buskers, beggars, touts, urchins, unruly apprentices, waifs, drunks, madmen, drovers, teamsters, porters, caravan mercenaries, tourists, scholars and the like that would be teeming on the streets. Hopefully, I'm right in my impression you are pretty good at making that sort of thing up yourself.
Unfortunately, I need to do about 100 dungeon rooms over the next week or so for my own game - at least in outline - or I'm going to be in trouble.
