Whatever you do, if you don't like twitch-based reload-a-thousand-times gaming, DON'T install Martigen's Monster Mod. I'd go with Oscuro, it's more balanced, lore-friendly, and less invasive. But yes, you do need something, otherwise you'll go from fighting nothing but rats and low level bandits in fur to fighting nothing but imps and bandits in iron and leather, and so on and so forth. No enemy variety whatsoever, and they're dumb as dirt. OOO (
Oscuro's Oblivion Overhaul) makes everything a bit more exciting, particularly in melee, and fixes the problems with magic and archery in the original (namely, that they sucked).
Hmm...other mods...
<span class="bold">DarNified UI</span> is a bit of a pain in the arse to install and uninstall, but you definitely need it. He states that the original Oblivion UI was designed for console and could be improved, and after installing it, you'll agree completely and never go back. I also enjoyed
the darker version, which works just as well and is pretty sleek and stylish.
<span class="bold">Midas Magic: Spells of Aurum</span> has a dumb name, and looks dumb at first sight (watermelon golems). However, in a non-cheating way, it adds an incredible amount of variety and fun to your game. Stay away from the attack spells if you have a low-end computer.
<span class="bold">WilliamSea's Ancient Towers</span> is the best uberhouse in existence. Don't cheat your way into it, it's made for godly characters. But still, it's got style, class, and features galore for just playing around.
<span class="bold">Kvatch Rebuilt</span> An immensely entertaining expansion, quite stable and a good choice if you're interested in seeing Kvatch recover. Or if you want to play at being a lord of Kvatch. A word of warning, this is an .ESM file, and likely to screw up your save game if you try to uninstall it without reading the directions.
<span class="bold">OblivionXP</span> converts Oblivion to using a system similar to Fallout3, where you gain XP from discovers and slaughter and use it to upgrade skills and stats. Does what it says and works well, but it slows down the overall level pacing. On the other hand, if you're a sucker for old fashioned RPG's or are OCD and want tight control over your skill advancements, it's marvelous.
<span class="bold">Sage Rime's Mountain Tower</span> is probably the best lore-friendly, non-cheatish house mod I've ever played, but I played it way back in beta. I'm not sure how performance-friendly it is now, it looks like he totally overhauled it.
<span class="bold">Armamentarium Complete</span> adds a lot of equipment to the game, if that's your bag, and it's all very nicely done and fits in well. Pretty unnecessary if you use FCOM or OOO or something, but works well if you do decide to try MMM (you masochist you).
Anything by Nicoroshi is superb. I believe Nicoroshi Creations is his complete pack (lacking a few things from the end of 2011), but he's fond of crafting beautiful, elegant unique weapons and handplacing them in locations for people to try to track down. Always compatible with everything because he doesn't screw around with leveled lists.
<span class="bold">Visual Enchantments</span> makes enchanting weapons cool again. You need this. You need this no matter what else you install or don't install. For instance, instead of your fire-enchanted weapon looking like radioactive orange crayon got smeared on it, you have gouts of flame rushing along it when you draw it.
<span class="bold">Darker Dungeons</span> is definitely good if you like stealth, and pretty nice if you never ever pull out a torch. I just liked it because of the realism.
<span class="bold">Natural Environments</span> is a very nice mod, really spruces up Tamriel. Again, like the above, Darker Nights helps with stealth and makes the game far more realistic.
<span class="bold">Cliff's Better Letters</span> is so much more than it sounds. He basically makes every little note you'd find places go from boring clutter to neat little tidbits. Definitely improves the lore and atmosphere of the game, and makes it entertaining to skulk in people's houses.
I'm sorry, I can't think of more off the top of my head. I know there were a lot more, but I can't remember their exact names and I don't have my computer with the proper bookmarks on it available.
carlosjuero: Bah. I screwed up my install :/
Unique Landscapes conflicts with Hoarfrost Castle (there is a farm you have to go to in order to start gaining an income, UL changes the landscape and the building is now floating in air) - the conflict causes the main NPC there to keep falling out of his house [thankfully he is marked essential... at least for one quest] and finding him in the new environment is a pain sometimes (I managed to find Fin Gleam though so at least I had that going for me).
In trying to troubleshoot that, along with a problem with missing armor textures on the next part of the castle quest chain (I built the OMOD wrong and the textures weren't put in the right spot) I apparently screwed something up - going to Cheyindal ended up with most of the buildings of Better Cities becoming invisible.
Going after a clean install of Oblivion now :/
I did a lot of reading up on Better Cities and Unique Landscapes, and the problem with both is that they (imho) don't add THAT much to the game, and cause conflicts with damn near everything. It's completely up to you, but I enjoyed the feel of the original game, and I very much prefer having new castles and dungeons dotted around to the delicate placement of rocks and trees and geographic landmarks that UL adds.
As far as the textures go, I can't help you there, I only used OBMM a couple of times, then I just decided to learn to install stuff myself. I found it works better if you're sensible about not choosing mods that conflict and stuff like that.