WB does it by tweaking game settings, as far as i know they can only be changed trough the construction set, not trough ini or console. The arrow lasting time setting is fArrowAgeMax, and it's 90 (seconds) by default.
It is very simple to make a plugin that changes that, just open the CS, load Oblivion.esm, select the "Gameplay" top bar item, select settings, find fArrowAgeMax, set it's value to what you want, and save.