No, it's not a problem with XP. It appears that Microsoft took a major step backward when they released Win 7 and found that the easiest way to close all the security loopholes was to lock everything down. Win 7 treats you like a blooming idiot and drives me nuts. Just a bit of a rant... I've had far too many dealings with Microsoft over the years, including the privilege of paying to report bugs in their "professional" products. Grumble, grumble, grumble...
Anyway, your problem seems to be a bit of confusion about downloading, extracting and then activating mods. You need to download the mod somewhere outside of the Oblivion folder structure entirely and then extract the zip file into the data directory (that unfortunately doesn't apply to all mods, but is a general rule). Once you've done that, you need to actually activate the mod for the game to see it. It's recommended you use something like OBMM to manage all this. Also have a look at http://tesivpositive.animolious.com/ - I believe someone included a link in a previous post. Start with downloading mods, then look at installing them - all in the left menu bar.
If you're still having trouble, post again with the exact mod you're trying to install and I'll see if I can step you through it.
I understand what you are saying with dont install it into the Oblivion folder at all, but earlier today I downloaded a mod, and for once it worked. And then I downloaded 8 other mods you needed for it to work. What I did: Downloaded it into the Oblivion general folder, then extracted it to the data folder. Once I did that, I new icon appeared, taking me to a new installation, wich I completed, and then I was able to use the mod. The mods that I managed to install: Kvatch Aftermath, Cyrodiil Upgrade Resource Pack files 1-7, and the newest addition of the Cyrodiil upgrade resource pack (files 1-7 were base files that you needed to install before any upgrades)
However, that process has not worked with any other mods.
Did you move the .esp to the data folder also?
Yep, with every mod I have tried to install.