Playing through Shivering Isles myself now at last. Spent ~65 hours going through the main game a while back, only really got into playin SI now. Loving it
I have these:
A lot of the mods I have will have multiple entries in the list on the left. I basically have the following:
Qarl's Texture pack - this is an amazing pack that replaces most of the textures in game. With this Oblivion still looks better than some of the tat released these days.
Illumination Within Revived - lights up windows at night, makes town look brilliant
Unofficial Oblivion Patch - fixes bugs that Bethesda didn't
Unofficial Oblivion Patch Supplements - the creater of the above stopped maintaining it, so this is basically an extra set of bug fixes to go on top
Unofficial Shivering Isles Patch - same as above for SI
Bors Bed Rolls - lets you put down a bed roll & sleep anywhere
Natural Environments - makes the environment more realistic and nicer by adding things such as bugs flying around, different typed of vegetation, natural weather and habitats
Quest Award Leveller - one problem I found with Oblivion is you can do pretty much any quest at any level and the reward you receive is based on your level at the time. This mod will level up your quest rewards so they will always be decent/useful.
Darnified - this is a must for anyone. Improves the overal GUI
Unofficial official mods patch - this patches the DLC
Fast Exit - if you're running Windows 7 / Vista Oblivion will exit very slowly and often crash on exit. Use this to fix that.
Reneers Guard Overhaul - I did have this for ages, it's a really good mod that overhauls the whole guard system. You'll find if you steal something, kill someone or trespass in game a guard will quite often magically appear out of nowhere to arrest you. This mod makes it so, for example: guards will run if you have almost killed them, you can bribe guards to leave their post, if you manage to kill the guard that caught you then nobody will ever know about your crime
and of course if you commit a crime when no guards are around then you don't get caught. There are a few other changes that you can read on tesnexus. Only reason I stopped using it is because it crashed the end game scene for me for some reason.
A lot of the mods I use are personal preference of course, probably best if you have a look through the top 100 at
http://tesnexus.com/
I could never get Qarls texture pack working... it just doesn't do anything. Same with the Shivering Isles texture pack.
That would be to do with archive invalidation, i.e. you need to tell Oblivion to use the replacement textures rather than the original. Qarl's setup guide takes you through getting round this.
Really frustrating, but it improves the game no end. 
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