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Open in Steam client (Library) and pick Oblivion. Use keg wheel (you see it on the right side with three other icon/buttons) and you should have some options there. From there go to Properties. There you have a tab with your games DLC and there you can enable/disable DLC.
From my own testing it will show Oblivion GOTY DLC and when checking store (from browser it will show that I own also Deluxe content - marked in store view as already in Library).
Don't follow that other posters advice to remove Oblivion GOTY as it very likely you already have that content from Deluxe.
Just make sure that in DLC section that Oblivion GOTY DLC have been enabled (radio box that can be toggled on or off) and that haven't by accident disabled DLC.
When you start a new game, you will get several notices on screen (about new item that is books or documents that can be found in your Inventory [last tab to right]) which leads to quest that will unlock Deluxe content and map markers that also will show new area which you can directly access from map, if you want to get those quest/items first.
In your quest log (Journal) you will also see new quests that are from DLC content.
If you use mod manager you will also see plug in (files that ends with .esp) that have name and DLC in the end.
From Oblivion in game, you should also be able to see those plug in listed when you press Escape key, go to Option and there you will have a mod section where you can control plug in loaded if you don't use any mods that will change vanilla Oblivion UI.
If the files don't show in his data files, he doesn't have the deluxe. It's that simple.
This game has a bug on steam where it'll say you own both but you don't and it's impossible to upgrade
I reached out to Steam Support regarding the inability to purchase The Elder Scrolls IV: Oblivion Deluxe Edition. They informed me that the Deluxe Edition is sold as a bundle and cannot be purchased separately. Additionally, if you already own The Game of the Year Edition, this bundle conflicts with it, preventing the purchase.
Since I have played the game for more than two hours, I am not eligible for a refund, and Steam Support advised me to contact Bethesda for further assistance.
My solution:
I plan to create a new Steam account and purchase the Deluxe Edition there, then play the game using that account.
I hope this information helps others facing the same issue! If anyone has found an alternative solution, feel free to share