anyways, what I'm talking about is when I go under an overhang or something outside while it's raining, the rain goes through the roof. any way to make it not go through the roof?

Well, rain sort of works (if I remember correctly) by applying a shader to the screen, like Night-Eye (or something similar, anyway). So unless you want to have your computer render millions upon millions of tiny raindrop meshes, each one with it's own little havok thing so that they bounce off whatever they hit... then no.
It's just not a practical solution,

However, I'm gretty sure that's what Grand Theft Auto 4 does. Every time it rained in-game, my old laptop would basically screech to a halt.

there are people working on a mod ot do it...

it works most of the time, see it here: http://www.gamesas.com/index.php?/topic/1070857-relzwipz-reneers-rain-mod/

Doesn't the Morrowind Code Patch enable collision on rain? I wonder how they do it...

Obviously, that's Morrowind, not Oblivion, and our understanding of Oblivion's guts isn't as deep as ours of Morrowind's, but it's an interesting idea.

This always annoyed me, because even World of Warcraft, a game targetted at low-end computer systems, managed to have rain that didn't cut through a roof / tree canopy / tunnel. The rain even splashed at exactly the right points. But with Oblivion it's seems really difficult to implement...

That wont work for me, I use AN. so many good ideas, so little time. *sigh*

Reneer must update his rain mod to be compatible with the stable version of OBSE 18, otherwise the game will crash.

Indeed. Maybe when I find some free time... there are some nasty bugs in that mod at the moment, unfortunately. I'm just glad I was able to get the PoC working.