The core issue is resource contention between write-intensive editing operations and potentially read-intensive public queries hitting the same database. Creating separate database instances is a standard architectural pattern for workload isolation. This approach dedicates one instance to transactional editing and another for public-facing, read-only services. Data can be synchronized from the editing instance to the public instance using methods like geodatabase replication. This physical separation ensures that high traffic from public use does not consume resources (CPU, I/O, memory) needed by editors, thereby resolving the performance degradation during peak hours.

A. Build new feature datasets: This is a logical data organization method within a single geodatabase and does not separate the underlying database resources or resolve performance contention.

B. Separate permissions for public services: This is a security measure to control access. It does not prevent high-volume, read-only queries from the public from consuming database resources and impacting editor performance.

1. Esri Documentation - ArcGIS Enterprise, System Design Strategies: The concept of separating workloads is a key system design strategy. "For a highly available deployment that must support a large number of users and a variety of applications and services, you may need to segment your architecture by function... For example, you might have one site for internal editing and analysis and another for public-facing applications." This functional segmentation often implies separate data stores (instances or databases) to prevent contention.

Source: ArcGIS Enterprise Documentation, "Deployment patterns," section on "Highly available and disaster recovery-focused architecture."

2. Esri Documentation - ArcGIS Pro, Geodatabase Replication: Replication is the mechanism used to synchronize data between separate geodatabases (which can be in different instances). "Replication also allows you to disconnect from the network and edit or query the data... Another use is to create a copy of the data to a different location to be used for a specific purpose, such as reporting." This supports the pattern of creating a separate, query-optimized copy for public use.

Source: ArcGIS Pro Documentation, "What is geodatabase replication?"

3. Esri White Paper - Architecting the ArcGIS Platform: Best Practices: This document frequently discusses separating systems based on workload. It recommends isolating intensive workflows. "Isolate systems that have different availability or performance requirements... For example, a public-facing web mapping application may have different requirements than a back-office data editing and maintenance system." This architectural principle directly supports using separate database instances.

Source: Architecting the ArcGIS Platform: Best Practices (May 2021), Page 12, "System Isolation."