I don't like OOO... it does some good things, but I'm not anti-scaling like some folks are. Think about traditional RPGs. Fantasy Star, say. You start out in an area populated by flies and the occasional scorpion. As the game progresses, you end up in areas filled with dragons and titans- but if you go back to the first area, you're still getting attacked by flies. It's incredibly annoying, just a total timewaste.
Likewise Final Fantasy 7- best RPG ever? I think so... Not hard enough to fight a character or area? Just go to the crashed airship and fight Unknowns till you get a few more levels and you can afford a bigger sword. It's just grinding by a different name. Can't progress in Diablo? Replay some dungeons. Get a realy powerful random weapon? Walk the rest of the game, since you're now stronger than the power curve.
So, I like that Oblivion is fairly uniformly challenging. Obviously it's ridiculous sometimes- when a bandit demands 100 gold from you, when he's kitted out with daedric gear worth 50,000, for example. Or, for that matter, when those bandits are bothering you when they could probably take one of the cities without breaking a sweat. But, I like that I'll never have to kill a swarm of flies again, or for that matter that when I was level 2 I never jumped into a cave and got murdered by an atronach. You do still get some variety, just that it's scaled to you. Shame it's by level though, screws the sneaky characters.
But, some mods are great... Harvest and the upgraded UI I love. If you don't like the compass, you can switch it off with the UI mod, bit of a pain for the grinding missions but it does give you back the sense of exploration. THen, some missions you're just lost without the red pointer. Find this guy in the imperial city... No thanks.
I love Oblivion... It's not perfect, in fact just now it's a bit dull (another oblivion gate... yawn) and the world's definately too small (the number of caves, ruins, inns etc make it feel crowded, and you run out of new cities too quickly), but it's still a great game.