http://www.uesp.net/wiki/File:OBCreature-Land_Dreugh.jpg

i have played through oblivion many times but for some reason ive never seen a Dreugh

They certainly aren't the most common enemy, but you should have a seen a fair few by the time you're level 33. They're fairly common in Blackwood and monster caves.

its strange since ive played more than 500 hours and never seen one

My character is permanently at level 20 and sees them fairly regularly. Sometimes on the roads. They begin appearing at level 17 and are classed as 'monsters'. If I was hunting for them, I would go to UESP and look for dungeons that contain 'monsters'.

Those things are cool with a k. I don't see them often, but when I do they're usually in caves.

True, you can often find them on the road between Bravil and Leyawiin, making the guards liars as they very much recommend you to stay on the roads to be safe

By the way, we don′t call them Dreughs here, we call them Billies. Don′t know why though...

I usually see Land Dreugh's in the southern part of the map near Leyawiin/Bravil and monster Dungeons. Land Dreughs are not fun to fight since they have that Shield Spell.