Lately as I'm walking around the game (in general), theres a strange echo; combat, non-conversation voices and footsteps echo as if in a cave; however, conversations do not echo, so it can't be AC97 or a new audio plugin. Any clue whats going on, or is this just a simple reinstall-fix?

Try regenerating your Oblivion.ini - http://tesivpositive.animolious.com/?page=know_how_to#RegenerateTheOblivion.ini

Check your audio drivers. Make sure you have the latest.

Try a clean boot as well - http://www.ehow.com/how_5331553_clean-boot-windows.html