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A few things:
PronSyrup is, in the main, sadly correct. The out-of-the-box Oblivion does indeed have its share of.... hmmm.... issues. The leveling system is/was roundly criticized even by enthusiastic fans, because everything levels up with you. You really don't feel as though you're accomplishing much of anything, especially when those level one crabs and wolves are still a challenge when you're at level 15.
The world is very beautiful, IMO far moreso than in Fallout 3- especially if you have a PC with the graphics specs to really make it run smoothly (I just build a quad core SLI rig, and man but Oblivion looks great now!). However, there are issues even with that- some of the textures they used, especially for the ground, are literally repetitive- you can visibly see the tiling, especially from a long way off.
The out-of-the-box arrow behavior in Oblivion is.... just... not right. You'll have to see it to understand, but fired arrows do not fly through the air like that in real life.
Fortunately, most of the complaints can be addressed by mods. Oblivion has as many mods as I've ever seen in any other game, some of which fix the rather glaring errors I mentioned above. For example, I highly recommend Qarl's Texture Pack (whatever version it's on at this point), a truly massive (but thankfully free) download that revamps most of the textures in the game to include enhanced bump and normal mapping, as well as adding higher-resolution textures than Bethesda offered. This mod makes Oblivion look like it should have done to begin with IF your PC can handle the additional detail.
There are also mods to fix the leveling issues and arrow flight paths, as well as many, many other things. The "Knights of the Nine" and "Shivering Isles" commercial packs produced by Bethesda themselves offer many new additions as well, including an orrery, wizard's tower (which is your own personal magical sanctuary), and other things- Shivering Isles adds a whole new realm to explore.
And finally, if you really want to be adventurous, you can always use the TES Construction Set to create your own dungeons, towns, and above-ground areas, so if you can't find a mod you want, you can- if you're so inclined- make it yourself. While doing so can be quite involved, there's some satisfaction to be had in creating your own personalized dungeons.
Personally, I'd grab it. Even for all its faults, Oblivion is worth the cash, IMO. Hope all this was of some help...
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