Are ANY mods installed at the moment?
Are you sure that the masterfile ( oblivion.esm ) is loaded in the data files menu?
Also, is you're XP Service Pack 1, 2, or 3?
Have you tried playing it directly from the .exe in the installation directory?
If you do have mods installed, uncheck them all in data files and load only oblivion.esm. If that works, then it must be your mods or load order that is messing with the game.
If you've already tried all of those, then my only advice is to try a clean re-install.