I'm having no problems with Oblivion except for some lag in certain types of fog and the 'common' crash when exiting the game right after a save. I play with all settings at max (AMD X2 4400+, ATI X1900XTX, 2GB RAM, Audigy 2 ZS sound).
It's well known from other games that internal sound cards (and speakers?) can cause problems. But the reboot error you had recently indicates something has overheated. What are your specs? Any old components, and have you overclocked something?
Oblivion is probably the most hardware-demanding piece of entertainment software out there now, and so far it's the only game that causes my graphics card's fan to spin at max speed from time to time. Temp indicator says it reaches almost 80 degrees C when it does!
