Mods to make the game challenging

[Kurt Wulfgang]

Any mods that you guys can recommend to make the game challenging?
Not in the "enemy now has x10 health" way at least

More like mechanically increasing the difficulty, complexity or whatnot?

[Scotters]

Get Oscuro's overhaul. I just started it, but it looks great!

[Ankou]

Oscuro's Oblivion Overhaul does make the game harder but it also does a lot more, so make sure you are on board with the changes before installing it. Same goes for Maskar's Oblivion Overhaul.

Vanilla Combat Enhanced is a mixed bag as far as difficulty goes but I use it.
It does away with the damage spongy-ness of the game by drastically boosting the damage multiplier. It makes the game harder (especially when coupled with OOO or MOO that add more enemies) because you are also no longer a damage sponge and can die very quickly... but it also makes it easier in that if you can dodge or block well everything goes down much faster. An enemy might die in 3-5 hits instead of 12-15, but so do you.
I'm assuming it would be possible to tweak it to adjust it to your liking with the ini and in-game difficulty.

Duke Patrick's combat mods make the game harder, though in my experience they also made it a lot more tedious. Oblivion could use some realism in it's combat, but the changes it made turned combat an irritating chore. YMMV, so read up on what it does and give it a try.

Enhanced Economy makes the game harder in a different way by making money more of an issue. It also has options for "breaking" enemy gear so you can't loot an entire home's value off one enemy but I found that to be too aggressive and unfun. But just the normal options to make selling loot not as profitable stave off the inevitable completely broken economy that comes with each of these games.