is P9700 fast enough for games? can it handle Oblivion at high settings with all the sounds and atmosphere in it?
is p9700 much faster then T5550?
Yes, it is more than adequate for gaming and yes it is way faster than the T5550. However, the CPU is not the most important factor when gaming though. The graphics card plays a bigger role and since your laptop has a GTX 260M in it, there should be no issue. The 260M is about equal to a desktop 9800 GT.
Look at the 9800 GT scores here: http://www.bjorn3d.com/read.php?cID=1332&pageID=5270
The system used to test the card is a little bit stronger than yours so your numbers will be a little lower. However, you should still get good performance.
i also had x3100 onboard.
This is the biggest source of your problem. The X3100 is an integrated graphics chip and was never designed to play games.