Oblivion may have attempted to correct Morrowind's faults, and it may have started in the right direction, but it largely overcompensated, skewing and re-breaking things in an opposite manner.
For example, I find Oblivion's guild storylines to be almost too "interesting," particularly regarding the Fighters Guild and the Mages Guild. Oblivion already had a problem, IMO, in actively grasping for "epic" via its main quest. Instead of naturally letting the player gain the feeling of epic, it was my impression that the game threw epic into the player's face at any given opportunity, as though afraid the player might experience a sudden memory lapse and forget how serious and grave and intense the goings-on were supposed to be. That was intensively magnified by several of the guilds (the MG in particular), which similarly insisted on having their own grasping-at-epic storylines unrelated to the already saturated-with-epic main quest, and which similarly threw epic into the player's face. When I join a faction, my expected plot-line from that faction is a disjointed series of tasks and and assignments and maneuverings to make myself the leader of that faction. Nothing more. In fact, when every guild under the sun has a deep and intricate and purportedly epic plot, it begins to feel incredibly unrealistic and unbelievable. Now, that's not to say that a guild can't have its own nuances and sub-plots and schemes. But they are by no means as cohesive and centric and tightly wrapped together as Oblivion presented. These are trade guilds, not conglomerate damsels-in-distress who desperately need saving. It makes sense for them to be large disjointed collections of jobs with barely any central plot-line.
I totally agree here with you. The main questline and Mages' guild questline both had that pressing feeling that you have to do it fast or else a great evil will destroy everything. With the fighters' guild questline it was a little bit better, at least the thread was no supernatural being, but in all these three cases you had a long established faction with its own army, yet you a noone were the only one who was actually doing anything about this immense thread that aimed to destroy the whole guild. It was always you and you alone against a greater evil. Frankly it fell unrealistic. On the other hand, the thieves guild questline was quite decent in this respect. You were building up reputation and it was not until the last stages that you got an important assignment. And beware, you did not have to save the guild form a great thread, but rather help a poor guy to regain his identity. The dark Brotherhood did manage the "thread to the guild" theme much better then the three other ones I have mentioned before. But overall, the questlines in Oblivion feel just too urgent and the stories are not original enough to be interresting. In Morrowind, the guildquests felt quite different form the main questline and could be seen as a way to take a rest form this saving of universe. In Oblivion it was no so.
And as for the combat system, while it visually is smooth and interesting, it's not without its problems due to overcompensation. People take issue with Morrowind's "swing-and-miss" combat dice rolls, and the illogic associated with a sword slashing right through something yet missing. So combat was revamped beautifully, but regarding chances-to-hit and missing, and dodging, skills and attributes were completely taken out of the equation. Instead, the player has complete control over what they hit irrelevant to their character skills, and damage is gimped to compensate. That leads to similarly illogical scenarios where something can take 40+ slashes to actually die.
I do not know. I never had problem with dice rolling and I never had any real problem with Morrowind's combat. Sure, it could have been done a bit better, but Oblivion's system is not the way in my opinion. I think that for me it si especially the combat and magic system that turned Oblivion into a FPS in stead of RPG. It is obviously very hard to maintain RPG feeling if you try to give the player a full control over things. Because it is either you own skills or the ones of your character. The more you strengthen ones, the more you have to nerf the others down. Sadly, beth decided to go the path of giving the player more control, but this inevitably brought the fact that character attributes and skills matter far less then they did in Morrowind. And to simulate the effect of skills, Beth developped the perks, that in my opinion did a further damage rather then solving things up. And watching Fallout 3 I fear that they do not plan on going back from this. For example the lockpick minigame was terrible in Oblivion and is even more so in Fallout3.