Remember Battle Chess? Is there any way to make a chess game in Oblivion which uses NPCs for pieces? Perhaps on a flat grass checkerboarded lawn area, or otherwise in a custom interior (cave, building, whatever) with a shiny checkerboard marble floor?
The only thing I can see that would be really *difficult* is installing a chess ai. I don't know how that would be done, but I do know there are open-source chess AIs out there.