About The Elder Scrolls IV: Oblivion

Performance optimization:
1) In Oblivion.ini set iMinGrassSize=130 (default: 80), this makes grass more sparse (the grass is mostly CPU intensive).
2) Disable HDR and use only Bloom effect (HDR in Oblivion is very hackish anyway). In most other games HDR doesn't cause much performance issues nor looks as garish as it does in Oblivion.
3) In Oblivion.ini set bDSoundHWAcceleration=0 (default: 1, eanbled) if sounds are strange.

Anything else is just choosing right quality vs speed trade-off with video settings.

Crashes:
4) In case of random crashes, try running the game on single core.

Other:
5) There are plenty of user made mods that make the game look prettier, but this is usually accomplished with higher polycount models and larger textures, so if you have trouble running the game as is, don't even dream of it. Not that the performance is any issue for hardware people are transitioning to now.