I agree that sleeping was pointless in Oblivion. I used to go days, even weeks at a time without sleeping, until I finally decided that I was just going to start sleeping at night for roleplaying purposes. I disagree with this, though:
The catch is that, in real life you enjoy eating and sleeping because it makes you feel really good, even though sleeping, eating and cooking are all time consuming and takes a lot of work.
Maybe this is true for a lot of people, but the real reason we eat and sleep is because we have to. We eat because we are hungry and we sleep because we are tired. I'm not saying that the activities cannot be made enjoyable, but the things we enjoy about them are not
why we do them.
When I was younger and more foolish than I am now, I stayed awake for over one hundred hours straight (four and a half days). Don't ask why I did this--it doesn't really matter. What does matter is that toward the end of that time I thought I was going insane. My body and mind were both rebelling against me. It was the worst I have ever felt in my life. When I finally did go to sleep, I slept for about thirty-six hours--missed an entire day. Woke up feeling like I had been freshly resurrected from the dead.
My point is that if I didn't
have to sleep, I probably wouldn't. But we need to sleep or things start to get really bad. So while I like the idea of some mild buffs for being well-rested, I honestly think that the best way of representing the need for sleep is by penalties for not sleeping. Someone mentioned above a cap on stamina that would slowly decrease after a certain point until you slept. That sounds reasonable without being too harsh. There were other comments that mentioned blurry vision and other tangible cues. That also sounds reasonable as well--I know from my own experience that after a few days of no sleep your body and brain just don't function as well as they normally would. So, maybe after a few days symptoms like that (and maybe even things like visual/auditory hallucinations, etc.) start to manifest.
If something like this were to be in the game, though, I think it should be in an optional "hardcoe" or "realism" mode. For however realistic it might be, I'm not entirely convinced it would be all that fun.