Are you using BSA redirection? Do you have the game set on large textures?
Yep and yep. I have the Steam version and I redated all the BSA's using a file attribute changer to 8/1/2005. I enabled BSA-Redirection in Wrye Bash and have the game set to large textures through the options menu (is there somewhere else I should set this?).
Forgot to mention, I've also tried the F-INev Oblivion high res skin pack and the texture changes but it just changes to a blurry version of the new one.