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Unlike Skyrim (which went the opposite way with the physical damage >>> magical damage at higher levels), Oblivion at higher levels places overwhelmingly greater importance on magical damage.
Funny enough, this does mean that daggers eventually becomes one of the best weapon choice in the game for melee combat, since they tend to be the fastest melee weapon. At higher levels, melee weapons depend on enchantments on the weapon (and not the physical damage on the weapon itself), so faster weapon tends to be better for dps.
Weapons in Oblivion - including both ranged and melee - do pathetic amount of damage no matter what. Do not expect to kill anything quicker with your classic sword & shield combo, no. The moment you choose to do something about your weapon, and weapons only, your life will be miserable and suffering. This is where the arts of magic comes in shine.
Why bother look for Skeleton Key when you can cast Fortify Security on yourself?
Why bother carry 30 repair hammers when you can cast Fortify Armorer on yourself?
Why bother equip a torch when you can cast Light on yourself?
Why bother fight against the outnumdered odds when you can cast Frenzy on them?
Why bother struggle against your foes' summoning when you cast Demoralize/Turn Undead on them?
Why bother wear any armors when you can cast Shield/Reflect Damage on yourself?
Why bother drop your valuable loot when you can cast Feather on yourself?
Why bother avoid waters in your horseback when you can Water Walking on your horse?
All potential is there, waiting for you to be utilized, and yet, you refuse to accept it, simply because you're blinded by your fondest memories of slaying your foes mindlessly with your mindless setup that you've successfully pulled off in Skyrim. No offence, of course.
Be a mage. Try to learn each and every single magical effects and their mechanics in this game. It is the most fun you can have in this game, in my opinion. Go ahead and educate yourself.
A poisoned bow with high stealth or chameleon and the enemy doesn't know what hit them. But it is an impersonal way of killing stuff. I tend to have conjuration as well. Firing off an arrow and sending a headless zombie into the fray and then sneaking somewhere else so they can't find you is a standard tactic for me.
Another thought is work up your hand to hand. That does fatigue damage and is more effective in later stages than your fragile bit of metal that your average dremora laughs at.
Edited to say that I'm an underleveller - I don't sleep until I want to, so what to choose as major and minor skills is not so important for me. Life's too short for efficient levelling.
I find out now that it is important that you stay at the same level that you maxed out agility / strength or your attributes. Since I am playing as a marksman, there is no reason for me to keep leveling up to make the enemies harder when I, essentially am the same. I am now level 20, and while I will not say I am weak, I am, frankly, not the strongest thing in the game. Liches kill me like I am leftovers, if my stealth fails I have to fire a lot of arrows, basically, this game is now very weird.
Makes me think if I should just play Destruction mage instead. In Skyrim the damage is not scaled, but I hope in Oblivion this will get better. Although High Elves get the best magicka amount there is no way a Khajiit cannot be arch-mage. I would just have to make sure to stop leveling up once I hit 100 intelligence and willpower lol.
I would have to put down the quest for the elder scroll, well, when you can cast invisibility you can go anywhere anyway rather than sneaking.
Don't forget that in game settings there is a slider. This is specifically there to balance the game when you've miscalculated and over-levelled; or haven't been able to get the right attributes on a level. It isn't meant to be a easy/hard thing it's there to fine tune the game so that you don't find it too much of a grind. You can move it up or down at any time in the game.
I would also not rely on invisibility too much. As soon as you interact with something then you become visible - so opening a door, picking something up will expose you. Chameleon is best to work on as it doesn't suffer from that drawback. Chameleon and sneak together make you practically invisible anyway.
If you're not going to level up start doing alchemy. Poisoning your weapons makes a huge amount of difference as well as giving you a heal over time that means you heal almost as fast as you get injured.
There's always the option to start again as well. But if you make a new character I suggest you read this first - especially the bit about the levelling problem:
https://en.uesp.net/wiki/Oblivion:Leveling
this is the way how i play Oblivion. I have it on default difficulty and level up only when i feel ready for some more challenge. each 5 lvl game add more challenging enemys so i tend to go for lvl 1-4 quite fast then work on my skills before lvl 5( well, lvl 5 most likely are safe) then go quicker from 6-9 and before i go for lvl 10 i try to see what kind of mobs are spawning, to see can i deal with them before adding stronger ones.. and dont get bothered to much about stats :D
Playing an archer, even a stealth one, is fine but it it only becomes OP with assisting magic, so (as usual) you will probably want to mix spells and alchemy into your play in Oblivion. The knockdown and paralysis chances you gain at Expert and Master marksman skill levels are nice. I recall a hilarious battle against Jygglalag (Shivering Isles boss) where he spent his time alternating between chasing me and being paralyzed by my arrows.
I just started a mage playthrough. I made 2 spells: Harbinger of the elements: Weakness to Fire, frost and shock 100% for 10 seconds. Fury of Aetherius: Fire, Frost and Shock damage 100 points on touch.
I challenged the grey prince, which has 40% magic resistance (if I recall correctly), I casted both, he was down to like 20% health, I drank some magicka potions, casted the Fury of Aetherius one more time, and the Spellslinger is the grand champion.
I still remembered how my dad had to use the arena bug to shoot the orc without getting hit in retaliation when I was younger, looks like magic is indeed, the true power in Oblivion. :)