The more I think about this, the more I think it won't work. You're better off having a separate XP partition.
I think you are right, this is unfixable for me. Tried everything.
Just for fun I'll list the issues I have with Oblivion, Fallout 3 and this piece of [censored]:
Frame skipping (skipping every other frame making the game sluggish and hard on the eyes, like watching film from the 1920's)
VATS lag (taking between 3 to 10 seconds for VATS to display targets)
Constant Crashes
Game crashes when exited, must use task manager to close application every time
Character animations slow down to super slowmotion in dialogues or are un-synced
At times no audio when speaking to NPC
Creatures and objects falling from the sky or rubber banding across the screen
Incompatibility with codecs for video files
Incompatibility with SLI causing flickering HDR lighting (HDR must be disabled for SLI)
Slowdown (slow motion making games unplayable)
These issues are as old as oblivion, and they have never correctly patched the games. They actually didn't even correct these issues until today in future games! it's ridicilious! I've had frameskipping since Oblivion, and I ran that on XP in the past. Most players who don't complain about it just don't see it there. One word = Bugthesda