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Additionally, while reduced spell effectiveness is not the end of the world, the fact that you're required to wear armor in the Arena is somewhat anti-spellcaster, particularly considering that four of the seven magic-specialized base classes don't have any armor skills as major skills and the fairly clear implication that a character's minor skills are generally not supposed to be among their most highly developed skills.
Frankly, I don't think that's worth the bother - you have to go to Cropsford every time you want to collect, and as with most other leveled gold rewards the amount you're given is a pittance.
Joeball, have you tried it? The Grey Aegis is the shield not the Elf. Think on it. (perhaps I was just lucky).
The biggest problems were the Orcs with their 25% immunity to Magicka
and their Berserk Greater Power (which I assume they used as they were tough). Obviously I made sure I had a good supply of health and magicka potions. I had to try the Arena with magic, the same as I had to try with H 2 H. Certainly, it is not for everyone, but, it can be done which was my point.
(My character has only magic as major skills, btw. and I agree, the arena armour is a drawback to it's use by a mage, but, by the same token, would a mage join the Thieves Guild, or for that matter The Dark Brotherhood. For my part, the answer is no. As I do not ever join either faction, and I don't like the Shivering Isles much, if I cross off the Arena and the Fighter's guild, there is very little left. I might as well just junk the game altogether.)
Also, disarm chance on a left/right power attack is only 5% and disarm chance on a block is at best something like 1.25% (Master Perk for Block is a 5% chance to disarm on a successful knockback counterattack, and the chance of a knockback counterattack triggering is 25%), so if either of those is the method that your "pure mage" used to get around the shield then, yes, I would say that you got lucky.
I do not see any particular reason why a mage would be less likely to join the Thieves Guild or the Dark Brotherhood than most other types of character, and I would point out that at least two of the magic-specialized base classes can readily be played as "thief/assassin with a strong magical bent" without deviating much at all from the class descriptions.
Combine magic with melee which will not only make your character more versatile in combat but adds nicer visual effects than just a blood spattered sword. Add weakness effects to a dagger and use them with damage spells or the Apotheosis staff available to buy in the market district to make yourself really tough for your enemies. If you want to expand on the spells which are quite limited overall then the Midas Spells mod is well worth checking out. It adds hundreds of new spells which need to be created using unique ingredients collected on some very long and tough dungeon quests. It's aimed at a mage build and has some of the most difficult enemies I've ever faced in a mod. The Emero-El liches have such high magical and normal weapons resistances along with master level restoration and destruction it makes them practically indestructible and that's the kind of challenge I like. Part of the fun of the mod is working out new and ingenious ways of killing the enemies you encounter using magic.
For me toughest questline in the vanilla game is the Mages Guild because the mage build enemies are more likely to constantly self heal and use silence spells on you and so Midas is like an expansion on the Mages Guild questline but with much tougher enemies.
https://www.nexusmods.com/oblivion/mods/9562
Another useful mod is Active Inventory which adds a touch spell you can use on any NPC to view their inventory and add/remove items. It works on followers like the Jemane Brothers so you can use it to give them specific weapons. Give them a fire damage enchanted dagger while you're using weakness to fire spells etc. When I'm closing a gate and have followers I make sure they are using frost damage weapons because most enemies in the Oblivion realm have fire damage resistances. Pre-planning for quests and using intel to gauge on the type of enemy and best loadout adds some strategy to the slayings.
https://www.nexusmods.com/oblivion/mods/17497
Using the alters at the university are great fun and a reason to close as many gates as you can for the all important Sigil stones.
(Also, what one person finds acceptable in role play, or for that matter the game in general is for them to decide, surely.)
I play un-modded which may or may not affect the Elf in question depending on how others have modded. That Elf is not invulnerable (vanilla), period. Though on the surface the shield does appear to make him so. And, that is the last I am saying on this matter other than: Have you really thought about it? I thought about it, and I tried out my theory, and "The Arena" can be beaten with magic in spite of the Gray Aegis.
https://steamuserimages-a.akamaihd.net/ugc/2408950893796797912/07A455FD1CFD5CE941DB53A97EADB1FC143A7470/?imw=5000&imh=5000&ima=fit&impolicy=Letterbox&imcolor=%23000000&letterbox=false
I should have known your contribution would be something like this effort. We're discussing how magic can make a campaign more interesting in response to the OP asking if playing magicless is boring. Hardly derailing the topic when it's on-topic.
Two, 100% Resist Magic should grant immunity to Drain effects and I cannot recall seeing an enemy thrown by a spell that did not otherwise affect them (for that matter, all of the times I specifically recall seeing an enemy thrown by a spell, that spell has killed them or at least applied a lethal DoT), so unless that Drain spell that you have active is actually a buff spell of some kind and you stabbed him to death while "fighting as a pure mage" I do not see whatever supposedly-obvious thing that that screenshot is supposed to be showing.
The Elf is wearing Arena Armour.
I took a shield with me because I thought I might need it. The shield meant I had to equip a weapon, but, actually, I did not use the shield, I was too busy with my three hot keys for potions and with pressing activate on my combination magic spell, he is very nibble, no time to think about anything but consuming potions and casting. I most assuredly did not stab him to death simultaneously with spell casting. The most important effect I used was Drain Health. I also had elemental damage effects, as you can see from the one resist message. And of course weaknesses.