For some reason when i go into the imperial city or bravil, looking at certain things will drop my fps from 60fps i have vsync on down to 45? Also in the outdoors my fps will just drop to 40s looking at certain things? This is the vanilla game. Only thing i have installed is oblivion stutter remover which works.

Core i7

6gb ddr3

nvidia geforce gtx 470.

That's not bad frame drop at all. Most people probably get worse than that.

Oblivion doesn't take much advantage of your multiple cores, and the processor load can get pretty high in populated areas, with lots of actors wandering around. Outside, grass is usually the culprit.

I always get a frame rate hit in the lockpick mini-game.

So what should i do? any good tweaks? i guess lower poly grass is a good step?

Turn off the fps display.

+1 ---- 45 in this game is very playable and if the FPS display is not on screen you'd never notice the difference between it and your 60 FPS max (with v-sync) - Turn off the display and enjoy actually playing the game !

45 is more than playable in cities. The fact of the matter is cities have more intensive scripts running in them because of the multiple NPC's and doors and whatnot. Some cities are worse than others (I've found Leyawiin and Bravil to have the worst framerates.) and you just have to live with it. There are many tweaks available to you, but most of them come at a visual cost which just isn't worth it in your case.

You may want to take a look at http://www.tweakguides.com/Oblivion_1.html though. It helped me quite a lot when I was playing on a weaker computer.

EDIT: And for future reference, Vsync generally kills your framerate. I've found it to be especially bad in Bethesda's games.