This game is almost perfect
The graphics in Oblivion are truly breathtaking. There is (thankfully) a "fast travel" option which allows you to instantly return to any landmark you've previously visited, whether it be a city gate, a cavern, or ruins of a fortress. But there have been times during the course of the game where I've chosen to walk from one city to another just to enjoy the landscape. Anyone who thought the weather effects in Morrowind were cool will be blown away by the weather in Oblivion. The first time you see it snowing at sunset you'll be amazed.
The sound is top notch, and the soundtrack adjusts very well to what's happening around you. The experience system from Morrowind has been retained for Oblivion, though the skill sets have been paired down. Instead of alf a dozen skills for weapons, there are only three, which are Blade, Blunt, and Marksman. For some bizarre reason, axes are considered blunt weapons.
What may be the tragic flaw of the game is that every time your character levels up, all of your enemies level up as well. Where in most RPGs, once you're at, say, level 10 or 15, rats and wolves are easily dispatched with a flick of your weapon, the rats and wolves in Morrowind can still be frustraingly long fights because they are getting stronger all the time. Unless you choose not to sleep (thus not levelling your character, but gaining the advantages of higher skill levels), there is absolutely no sense of progress in the game. You always feel as if you're stuck with a level 1 character.
The main quest is interesting, but some of the sidequests have actually drawn me in much more. Much like Morrowind, it's the side quests that make the game so immersive. Also, be prepared to have news of your deeds travel ahead of you. The renown meter from Morrowind is gone, but you'll know that you're becoming well know because NPCs will start comeing up to and saying things like "It's you! The hero of [insert name of battle here]"