Don't have a problem running games like Bad Company 2 at full settings, and even Oblivion's sister game, Fallout 3, runs perfectly with framerates over 80. However, in Oblivion I'm lucky to get 40 fps, and frequently get as low as 15 whenever there are NPC's in the screen.
I've already tweaked the Oblivion.ini file
Intel i7 920 @ 2.66 ghz (Not overclocked, though I could do so easily if need be)
6 GB RAM
Radeon 4890 HD
(if you think anything else might be the problem I can give more hardware specs)
Newest Radeon Catalyst Control Centre. Went on the Radeon website just last night to make sure I was updated. I'll try and look for an update i might have missed.
Any drivers except video ones I should look into?
Do you have an add in Soundcard or using Onboard --- Try disabling Music in the .ini file and see if the FPS picks up -- if it does look for updated sound drivers and\or tweak the ini settings to lower the maximum # of sounds the game will process (the game really has some issues with the sounds and various Codecs.)
Actually, I've noticed something very strange, no matter how many times i change the in game settings they always change themselves to something weird.
For example I tried turning down interior and exterior shadows to 8, played for 15 minutes.
When i went back into the menu, exterior shadows was at 10 and interior was at 2.
This happens with all the sliders.
My specular distance went from 40 to 100, the various Actor fades and such were all at seemingly random numbers as well.
i can play this game on absolutely full detail on an 8800gts and a core 2 e6600 with 2xaa on 1650x1050, so you should be able to run it fine. Some people are having issues with quad core cpu's. There is another thread about this where you can disable cores or something.... Also update you oblivion to the latest patch if you havn't already. Also if you dont mind disabling grass, that will help, i had to do that when i was running a 9800xt and single core athlonXP to get smooth gameplay.