What's the best mod for bettering graphical features of the faces on oblivion?

I would say that, in true Oblivion fashion, it takes more than one mod to make it right!

http://www.gamesas.com/topic/1170609-how-do-i-make-body-seams-as-unnoticeable-as-possible/ has some good ideas for fixing the various issues with faces and the bodies they are a part of. You might have to work your way through the three pages or so, but from memory, it would be worth your while to do so anyway.

I really like http://tes.nexusmods.com/downloads/file.php?id=14805.

And it will also depend on what you're trying to change, and why. There are replacements for the head mesh, replacements for the texture, and replacements for the overlays that add aging, tatoos, etc.

If it's only for the Orcs, Khajjits, or Argonians, there are mods that address each of those separately.

I use Tweaked Generic Faces, along with Enayla's and Improved Facial Textures (you have to install IFT over Enayla, IIRC).

Then there's no need to install Enayla's, since it replaces only skin textures while IFT replaces not only skin textures, but age maps as well. Install IFT first to replace age maps, then install other facial texture replacer.

http://tes.nexusmods.com/downloads/file.php?id=39656

The neck seam outweighs any other consideration, so any face mod that isn't made for the bodies you're using is not worthwhile.

My favorite faces are from navetsea's F-INev Oblivion Skinset, which I install over top of IFT. That pretty much takes care of all the non-beast races.

The trouble is that Robert's Male and Female are the only bodies with texture sets and other considerations made by the same artist for both genders, so any other combination is going to result in something mis-matching somewhere, as males and females will always use the same face tex. Navetsea's skinset is for EC female bodies, but the faces do alright with Robert's male body textures. Not perfect, but well worth it for me since I like them so much.

What about VRD?
http://tes.nexusmods.com/downloads/file.php?id=39823

By the way, I am making an enhanced version of it, and will release it in several days.

Here's some samples.

http://tes.nexusmods.com/imageshare/images/547612-1331575976.jpg

http://tes.nexusmods.com/imageshare/images/547612-1331556101.jpg

That's a very nice mod, but you still have the problem that while that looks very good on women, not so much on men. Most men, and I think this is particularly true on Europeans, have heavier eyebrows and less flushed lips. The eyebrows have been a problem for pretty much every Oblivion face ever - I think the best effort I've ever seen to straddle the divide is Natural faces, and it's still what I use.

About the men, I guess you didn't notice the eyebrows are much heavier in the new version, which is not released yet.
http://tes.nexusmods.com/imageshare/images/547612-1331575976.jpg
In the new version, I separate the male and female face textures, so men not only have heavier eyebrows but also have stubble (except elves).