Well I voted option 2. I love Oblivion, and I've already started over once, but that was mainly because I had scr***d up my first game by using console cheats to increase skill points.
The things that still keeps me going are the quests I haven't finished yet. When I'm finshed with all quests I see no reason to keep playing, unless some mods come along to keep me going.
I will, however, start a new game later when I've played some of the other games I have that are 'waiting in line', and then I will probably start with a special character who will only do good things (no Dark Brotherhood or Thieves Guild), and again I hope there will be lots of great mods/expansions out by then so I will feel I'm playing a new game...
The atmosphere, graphics and sounds are certainly good enough for me to come back for more, but the quests aren't.