That was pretty standard for 32 bit executables at the time.
32 bit windows can only address 3.5 gb at best and some of that is reserved for Windows itself, so it wasn't a problem.
A couple of things have changed so that being LAA is beneficial to Oblivion now.
So is it recommended that I run this if I'm using a 64bit OS?
I guess I'm a bit confused if Oblivion is utilizing the 4gb of ram in my system.
If I am reading things correctly on this topic, Oblivion will only address up to 2gb of ram, and my guess is once the Oblivion.exe process has surpassed this 2gb limit, instability can occur.
I know I have never seen my Oblivion.exe memory usage go beyond 2gb. i think the most I have seen is 1.7gb on a heavily modded game.