I hope to GOD they have LODs for the player models this time. This was one of the main reasons why there was never any large battle scenes. You can't very well cram tonnes of NPCs into the scene when all of them are being displayed at their full high-poly high-resolution glory at all times, it's ironic in oblivion that some of the most important battles are executed with maybe 20 people at most, and even that puts a strain on your computer.
While the character models do indeed have an effect, the biggest culprit to this problem was in fact the AI. For those bigger battles they had to turn the AI off using scripts, because there is a limit in the engine to how much active AI there can be at once.
To see this in effect make a quick mod in the CS for Oblivion that drops maybe 10-15 enemies into one room, save the file and start up the game. Once you go into that room you will get attacked, but only by maybe 8 (I think, I can't remember the number limit) of the people, the rest will just stand around until somebody dies.