Agree with the people suggesting M&B combat. If Bethesda can gain 'inspiration' from that and make it look nice in first-person view then we'll have a winner.
I am afraid, having seen the M&B combat videos and having played a lot of Oblivion, that M&B combat might be too "realistic", too much on the "simulation" side, as opposed to the "arcade" approach of Oblivion.
In plain words, M&B system might be too difficult / frustrating for the mainstream / casual customer crowd (which I count myself to be part of). I see how a system like M&B could be fantastic for a player with enough
patience and determination to learn all the ropes. But many people (maybe not the majority on this forum though) expect different things from a game, for better or for worse.
There's a lot room for improvement / tuning of the Oblivion system, but my guess is they won't be going in the direction of making it more realistic at the risk of possibly making it too tedious for the average customer.
I hope I am wrong, though, and they'll come up with a brilliant system that is both simple, realistic and fun to play. Or they will create a setup option to switch between the simple and realistic approach (something like
the hardcoe mode in Fallout: NV, but regarding some combat parameters).
Incidentally, when talking about the combat system, let's stop for a moment and look at the physics system (which is a related topic). It was lovely in Oblivion that you could pick up stuff, throw it around, drag bodies,
etc. but don't you get the feeling that the items (especially weapons) felt too "light" and lacking in inertia? Those swords flying in the air as if they were made of cardboard. And the bodies, behaving like rag dolls,
and falling down after the final strike like they were puppets whose strings have been cut. Lots of room for improvement there, IMO.