For now I've gone relatively light on mods so as to prevent any conflicts and ensure the game is totally stable. Since everything worked out fine without needing any tweaking, I'll probably load up some more in the coming days.
Oblivion mod manager. A must.
Francesco's leveled creatures/items mod. For altering the leveled lists so that enemies are at a more static level, and loot is more realistically dispersed, and you'll fight both strong and weak enemies as you progress. Also adds a bunch of other optional good stuff.
AF Level Mod. Allows you to change the leveling system to one of several different methods. The one that caught my eye makes it so that every time you get a skill-up, its governing attribute will be raised by a fraction of a point (more for major skills, less for minor). Once you have 7 attribute increases, you gain a level. So no worries at all about breaking your character or multipliers or whatever.
Midas Magic Spells of Aurum. Adds a ton of spells, and makes a sort of quest for obtaining each one. Greatly expands the magic system. Set magical traps, shoot d&d style magic missiles, create projectile barriers, summon comets, breathe fire, etc. etc.
Unofficial Oblivion Patch Fixes 1,100+ bugs.
Quest Award Leveling. Upgrades your quest rewards to the appropriate level as you get there. No worries about holding off on doing a particular quest so you get whatever version of that item you want.
Phinix Immersive DarkUI. Improves the look and feel of the UI. (note: follow installation instructions correctly).
Qarl's Texture Pack III. Graphical megaton. Replaces textures, normal maps, parallax maps, specular maps.
Natural Environments. Adds weather effects, improves the look of trees/vegetation, adds birds and insects.
Martigen's Monster Mod. 150+ new creatures and NPCs in 1900+ variants. New AI/behavioral stuff.
Younger Hotter NPCs Women. No more shrek women.
Female EyeCandy Body Replacer (NSFW). Gives female characters a greatly improved figure. Also available in
underwear version for the prudes.
Rens Beauty Pack. Adds the custom race Mystic Elf (pictured in my screens) in male and female versions, plus lots of hair options. Requires
KT's custom race fix .
Cyrodiil Transportation Network. Gives you a morrowind-style transportation system. Mages guild teleport network and a silt strider style city to city network. Also lets you disable the default fast travel nonsense.
Skip Tutorial. Lets you bypass the tutorial dungeon.
Crowded Roads Revamped. Gives life to the road network. Adds traveling merchants, adventurers, bandits, etc. Keeps things interesting if you've disabled fast travel.
Cyrodiil Terrain Map v25. Replaces the default world map.
LowPoly Grass.. Better grass performance.
Illumination Within. Adds window lighting at night for buildings.
That'll get you started. Installed correctly, using the default list order within the mod manager, I've had no conflicts. But that's really just the beginning. Some people run 300+ mods. Check out
Deadly Reflex for new combat moves like decapitations and horse combat.
The Lost Spires is a well-regarded quest pack. etc. etc.