I recently re-installed oblivion and NMM but when I try to download a mod i get a message that says "nexus mod manager is not set up to work with oblivion etc" but i have rescaned all my games, I did install oblivion under a folder named "cyrodiil" would that have any affect?

Yes it would. You need to manually put in the install directory for your Oblivion game if NMM is not detecting it properly on it's own.

NMM is finding it on it's own and this is about the fifth time I have rescanned all games so that must not be the problem.

That's strange. I had the exact same issue on my daughters PC and all I had to do was to manually point it to my install directory. I don't usually use NMM for Oblivion. TES Mod manager is an updated version of OBMM and Wrye Bash of course is the best choice. Sorry I couldn't be more helpful, I'm sure someone will find a proper solution.

Your best option to get help is to post your NMM issue http://forums.nexusmods.com/index.php?/forum/406-nexus-mod-manager-open-beta/.