I think you'd just have to adapt to Oblivion's form of "difficulty". You can use some in-game bugs to your advantage. For example, if you're a marksman with high enough sneak, you can exit an enemy's aggro range, if you're far away enough; just stand about 20 yards from the enemy in sneak mode and stand completely still in a dark area. They won't be able to properly detect you. Keep in mind, that you will push them backwards with every shot, and if you push them too far, they'll move closer to you again, and the sneak eye will light up, but they'll quickly lose the aggro and the eye will become dark again, if you just stand still. I am not exactly sure how this works, but it also seems like an enemy will eventually detect you if you stop shooting them, and if they summon a creature, the creature can potentially detect you, which in turn also makes the other enemy detect you. If you absolutely have to play on a high difficuly you'll have to use everything available. Conjuration is probably the most powerful spell class in high levels. As a final note, I'd suggest putting some points into speed so you'd quickly be able to get away from an enemy, this is really good being paired with a summon, because they usually don't aggro the summon. Sorry for the long post and sorry for not being able to help with the settings, but that's my experience with the difficulty in Oblivion :/.
