You're right on all counts. Without any mods to specifically effect the difficulty slider, it increases your damage taken and decreases your damage output, by up to 6 times (at max you take six times the damage and do one-sixth the damage you do if the slider is at zero).
It has no effect on any actors but you, including companions, and to my knowledge nothing currently available can change that.
Thank you very much for your accurate information.
What's already said. I'd say that most players will have challenges for +25 chars with OOO. Not with Bandits, Wolves and such (but do you really want Lvl 50 Wolves?), but with OOO's added enemy factions, bosses and buffed vanilla parts. Have you done dungeons with the Guardians of Oblivion, with OOO bosses etc.? There are plenty of those. I just did Charcoal Cave with a Lvl 25 char and she was torn to pieces really quickly the first time she tried the boss section. Lord Volmyr should be a challenge for most Lvl 25 chars. Etc.
Yes, you are right: infact I have fought against the boss of Skyrim bandits and it has been a really hard challenge. The problem is that, after completing all Oscuro's challenges, my game will be over (when my ambition would have been continuing to explore difficult dungeons for a lifetime).
Guardians of Oblivion, Amazons and the Bosmer ranger dungeons (the ones near Anvil) will all keep you interested at level 25.
But....
Why not start a new character? I've fallen into the trap before of unconsciously assuming ome mod install= 1 character, but there's no reason why it should. You don't have a abandon your superhero permanently providing you keep an appropriate save, but playing OOO at level 1 will give a new and refreshing perspective on the game, OOO, and surviivability in general.
Yes, a new character would be a good idea, but the problem is that I'd like to continue finding new places and new challenges with my Argonian: restarting Oblivion would mean doing the same quests for a second time.
There are a lot of things that I could do, but my character's strenght is arrived at maximum while the level of my exploration is not still at maximum! This is the main reason of my frustration.
Just out of curiosity, what kind of equipment do you use? If you have high magic resistance, or high reflect damage/spell, the game will be too easy. I'm not telling you how to play

but just try playing without reflect damage/spell (which are broken in my opinion), and
try to limit yourself to resist magic 20/30% and spell absorption at 50 (the bonus given by the Atronach birthsign). If you want a different experience, try using passive defense, like shield and absorption spells, instead of aggressive defense, like reflect damage/spell. You'll see that even lower level mages and bandits can become dangerous if you face them in packs. OOO is all about stats and skill level, so going naked against a bandit when you're level 25 should result in your winning, since you'll more than likely have better stats and skills than him.
Like Arkgnt said, try poking around Anvil and visit Nornalhorst and Dasek Moor and you'll see that the game can be challenging, even for lvl 25+ characters.
I hope I'm not being too patronizing! Enjoy OOO

Thank you, Dazu, for your post. It would be difficult to tell you the exact equipment, but I can say that I have a great one (however, not spell reflecting skills/objects). My problem is that my character kills enemies with 4 blade hits (a Daedroth, for example, dies with 5 hits)!
I had to Read the Oscuro's Readme,the harder quests are found by reading the notices in the towns posted near gates, or by accidentally finding them during exploration.
I have lost many characters by accidently entering ruins and dungeons that have been changed by OOO.
I hope that Oscuro has created dungeons (not quests, because they end) with 25 level enemies, so that I can go there and enjoy myself for a lifetime.
These do not have compatibility issues and ive played them with fcom there r even patches for them . Get them they r a must have in my opinion really fun.
Thank you for your suggestions

If you want to ramp up the difficulty level, just use http://www.tesnexus.com/downloads/file.php?id=10925. My character is level 23 and consistently gets owned by vanilla opponents. I'm playing through the Kvatch part of the quest now and fighting 6-10 daedra at once is well nigh impossible. (Might partly be because I'm a generalist, which isn't good for fighting swarms.) Although I don't often play without it, I find the difficulty between vanilla and a game with RF to be about twice as challenging.
With RF you have to limit your gear to what you can realistically carry and still fight: wearing the best heavy armor and carrying the best weapons means massive fatigue burn unless you have a massive Strength score; consequently, you'll be out of steam within moments of entering combat and your attacks will suffer, you'll end up tripping or being knocked down, which is basically instant death in a swarm of high level opponents. It's really quite challenging, even with vanilla creatures, so there has never been any need for me to increase spawn counts. As it is, I have to use all of my ingenuity and skill to survive encounters with multiple opponents. Gone are the days of carrying around arsenals of weapons, staffs, potions, alchemy equipment, etc., for 'just in case' scenarios. With RF, you can really only carry what you need and little else.
The great thing about RF is that it affects your opponents, too, so you can use fatigue burn on your opponents to your advantage: I routinely enervate bandits in heavy armor to reduce them to their knees so that I can dispatch them quickly. (Unfortunately, that only really works on heavily equipped opponents.) If you use companions, they'll be affected as well. This makes using companions much less of a 'cheat'.
RF is my one 'must have' mod, and the only one that is guaranteed to be in my LO every time.
The problem is that I use Oscuro, that is quite different from Vanilla, and Vanilla has very challenging monsters. Thank you for your suggestions, but I think that even with a lot of fatigue, my character still kills enemies with four hits.
Sorry for the lack of info in my last post I wasn't able to write more.
About the first couple of mods I recommended you, they are epic. There are a lot of compatibility patches for use with FCOM, Better Cities, etc. I personally like the Kvatch Rising, it is really immersive, and the Origins of the Mage Guild. Those will NOT give you super hard enemies, but it will give you a lot of added gameplay hours. Origins of the Mage guild is the only one that needs the compatibility patch to work with FCOM, it is the file FCOM_OMG.esp, and other mods that conflict with this mod will have the compatibility patches included in them. Always look for compatibility patches in the mods you download. I also suggest Armamentarium, hundreds of new items, makes looting more fun.
Good idea the Fatigue mod posted above, also, there are ways to increase spawn rate, more mobs at the same time to PAWN!
EDIT: I should also add to the list the following leveling systems: nGCD and Progress. makes leveling harder, plus the brand new Skill Decay (requires obse v0020 beta 4!) so that as you level, your skills will decrease over time and you'll need to train them to keep them up. Let's put it like this, if you use this 3 combined, and the difficulty slide to the max, if at the beginning of the game, any of the daedric warriors attacking the emperor touches you, you are insta death.
Thank you for your suggestions

but, as written before, I don't want to install FCOM at the moment. However, I'll read this post again for future reference. Thank you again!
As already answered by others, it reduces your attacks and increases the attacks of everyone else, including summons and companions. So increasing the difficulty slider has the negative effect of drawing out fights a lot more (since your attacks make much less damage), while keeping your summon and companions as powerful as before (or even more powerful).
It certainly works, but with the drawbacks I mention, but whether those matters is of course subjective.
Thanks.
If you use Deadly Reflex, the 250% damage and timed block options make combat really deadly.
Mhm... I've read about it, but there are things that don't convince me.