It's fine how it is imo.
Just finished installing Oblivion.
Gonna add very few mods, so I can get pretty much the vanilla experience, though I was thinking of using the Oblivion XP mod.
It gets rid of the awful leveling system Oblivion has, and replaces it with a system where you get XP from things like discovering locations, combat, etc. and get skill points you use on your individual skills and attributes when you level up.
Pretty much just turns it into that classic RPG leveling system.