PATCH 1 UPDATE: The first patch on PC updated the bundled version of Nvidia's DLSS plugin for significantly better image quality when in use. If supported by your GPU, I would recommend using it on "Quality" mode.

My build is:
CPU: Amd 5900x
GPU: Nvidia 3080
RAM: 32GB at 3600mhz
Game is installed on an SSD

If you have a similar PC these settings should be a nice balance between clean visuals and a solid framerate. Performance is a mostly solid 60fps outside of the denser cities in which drops to 40ish seem to be unavoidable. This is not a well optimized game and CPU bottlenecking when lots of NPCs are present seems to be inevitable, even with a NASA PC.

Without further ado here are my settings:

Display mode: Full Screen
Screen Resolution: 3840x2160 for beefy GPUs, 2560x1440 for mids, 1920x1080 for lower tier cards.
Refresh Rate: Whatever the max refresh rate of your display is. It will be at least 60hz.
FPS Cap: Max 60 FPS. This game is not well optimized and will most likely frequently be inconsistent to the level of distraction on anything above that.
Vertical Synchronization: Off. Force it in your GPU settings instead for reduced input lag versus the ingame implementation.

The next 3 options will make the biggest differences in your overall graphic quality and performance other then Screen Resolution.

Dynamic Resolution: OFF if you have an Nvidia card in RTX 2000 series or higher. Use DLSS on Quality mode instead. If that is not an option, then enable this setting. This tweaks graphics effects settings on the fly while still providing a sharp native resolution image output versus using DLSS or FSR3 which are always going to look softer to some degree. Alternatively, you can keep this off and enable either of the next settings (FSR3 or DLSS) to Quality for similar performance gains. Using Dynamic Resolution will provide you with a sharper image versus FSR3 Quality / DLSS Quality providing softer and slight better performance visuals, but both should not be used at the same time because image quality will be horrible.

FideltyFX Super Resolution 3: Off, or Quality if DLSS is not an option and Dynamic Resolution is turned off. Enabling this is also one of the options to fix the shimmering shadows and grass when Anti-Aliasing is not enabled.

DLSS Super Resolution: Quality if you have an Nvidia card in the RTX 2000 series or above. This has been updated in the first patch to provide much better upscaling quality while yielding a big increase to overall FPS. Enabling this is also one of the options to fix the shimmering shadows and grass when Anti-Aliasing is not enabled.

In terms of overall image quality versus performance:

If you have an Nvidia RTX 2000 or above, I would highly suggest setting the display resolution to 1440p, or 4K if you have a 3080 or above, turning Dynamic Resolution OFF, and DLSS to Quality.

If you have an AMD card, I would recommend enabling either Dynamic Resolution or FSR Quality, but not both as the combination will seriously tank image quality.

The rest of the options:

DLSS Nvidia Reflex Low Latency: On+boost if DLSS is enabled. Reduces input lag.
Upscale Sharpness: Maxed out.
Rendering mode: Progressive.
Image Quality: Max (This is very important, I don't know why this is so low by default!)
Ray Tracing: On if you're using either DLSS or FSR3 and have at least a 30xx series card, equivalent or above. UPDATE: After doing further testing I think this is crucial enough to the game's visuals that it should be kept on unless absolutely necessary.
Ambient Occlusion: SDFAO. Set to SSAO for additional gains. Turning it off completely will look pretty bad, I wouldn't recommend it. This is disabled by default when Ray Tracing is enabled as it provides the same function.
Anti-Aliasing: TAA if you are not using FSR3 or DLSS, otherwise turn this off. Unfortunately, TAA in DD2 (and many other modern games...) seems to go overboard and softens the entire picture, blurring texture detail instead of just cleaning up aliasing, but it's still overall clearer then using either of the upscale options. This will also fix the shimmering grass and shadows if you don't have FSR3 or DLSS on.
Screen Space Reflections: On. Provides a decent little bump to FPS in outdoor scenes if disabled at the cost of bodies of water looking quite a bit worse.
Mesh Quality: Max.
Texture Filtering: High Aniso x16
Texture Quality: High 3 GB. Set to Medium or Low for cards with extremely low VRAM.
Grass / Tree Quality: High. Setting to low has very little performance impact.
Resource-Intense Effects Quality: High. When disabled it turns off all of those cool spell effects in combat, so another last resort for potato PCs.
Shadow Quality: High. Turn this to Low for more performance gains if necessary.
Shadow Cache: On.
Contact Shadows: On.
Motion Blur: I prefer off, but this is to taste.
Bloom: I prefer on. Again, whatever you prefer. Basically no performance impact.
Depth of Field: I prefer on, but this is again to taste. Little to no performance impact.
Lens Flare: On. See above.
Lens Distortion: Off. See above.
Subspace Scattering: On. Makes skin look better at little to no cost to performance.
Motion Quality: High

Turning "Data Processing for the Purpose of Analysis" to OFF in the Network settings in-game may also provide a boost to performance.

Some people have found that setting the DD2.exe in the Task Manager: Details panel to High Priority also improved performance. This has to be done every time the game is run.

The RE Engine handles its brightness settings in a bit of an odd way, both in SDR and HDR modes. In this game, I would recommend playing with HDR if possible as I think it looks better when properly configured, but on many PC and monitor / TV setups, HDR can be a bit of a crapshoot. So here are some recommended settings for both HDR and SDR modes.

If you find you cannot activate HDR in-game, go into the Windows HDR settings and enable it there first before launching the game.

Max brightness: All the way to the right
Min brightness: All the way to the left (this is skipped in HDR mode)
Final brightness setting: Two clicks to the left from the middle / default setting.

If you're playing on a really non-dynamic monitor these settings may blow out some highlights and crush some black levels, but I think that's a preferable choice to the kind of washed out and low contrast look the RE engine looks like on default settings.

Here are some shots of the game running in SDR with these settings.