Basically, I want to make a mod that makes it so that mages are more then just squishy archers. I plan on doing this by making a handful of custom spells, weapons, and items that make mages more potent. Possibly, if there is a way, I would like to tweak their AI to change the way they fight, etc.

Is this even possible to do? Is there a simple way I can make these spells/items appear on mages that are spawned, or do i need to place them on each mage specifically. Also, is there a way to make some spells/items appear on higher level mages only?

Yes to all. If I'm not mistaken common procedure is to check for nearby actors and place a token item on them wich in turn gives the npc that holds it the desired spells or items. It just needs a check on the first script so tokens are not added twice to the same actor and there you could add as many checks as you want, to only affect npcs that has magic as their specialization, or npcs of certain level, etc.

Tweaking the AI behaviour is a bit more complicated and it needs heavy scripting, but I've never messed with that so maybe there's some easy workaround.

Btw, if you want to make harmful spells deadlier you could simply lower magic effects cost, increse spell's power, or both, simply altering default ones.

...oh! You mean NPC mages. Was gonna say, between conjuration and illusion mages are stupidly overpowered.

I know there have been some projects which did a bit of this sort of thing. LAME gives more diverse (and useful) spells to NPC mages. There's a mod called Enemy Actors Use Powers which does some scripted AI adjustments that might be easily converted for normal spellcasting. I'm sure it was also on Syclonix's list for his http://www.gamesas.com/index.php?/topic/1005791-wipz-brains-instncts/, which was abandoned when he vanished but MrFurious just (today) announced he was taking over.

Once Duke Patrick's combat magic is released expect mages to be smarter and deadlier in combat - albiet with the new powers that mod will give.

Still Magic is so one sided in much of Oblivion. Even with Midas, LAME, SM, Fearsome - I'm not seeing much of the mod added spells being used by them. That is very much missing.

It would be neat if even some of the illusion spells could have an effect on the player character. Like a strong pacification and they you are unable to attack an NPC.

Yes, quite.

One of the only mods I've seen that even tried to tackle some of Conjuration's... issues... is ROM. Apart from the odd general magic hoser (e.g., Fizzle), I mean. Not to sound as if I disapprove of or dislike those, btw. Hardly.

Oh, and it also "overhauled" Illusion. With about the same level of effectiveness, perhaps.

Yes. Specifically, this mod uses tokens with scripts to tell the actor to try to cast x every x seconds if the player is x distance away from me. I cannot make them use range spells because there is no function that I know for it. Feel free to look at the scripts.

Get DR 6, then some how make the criticals happen 90% of the time. Done.

I found magic lacking for both the player and NPCs so I used bashed patch tweaks to increase the bolt speed to x1.4 and higher. It's not so much that the spells aren't strong enough, or the AI, it's the fact that not a single attack spell ever hits a player because said player is constantly on the move.

To make matters worse (somehow ), I use an old Duke Patricks combat geometry mod and momentum damage and shield tricks and fun stuff like that. It made me play in third person and constantly keep an eye on my back. When I see a blob of ice strolling along, I wave it goodbye as it passes me.
Spells need to actually hit something in order to do damage. If spells can't hit because they fly too slow, then no manner of AI tweaking or damage-adding is going to change anything.
Now if spells were instant hit, or friendly-fire-friendly area-of-effect (and aimed at the ground near the player), then that would change things completely. You could keep the bolt speed where it is but force the player to move out of the way even further.

Or maybe even changing the bolt size... or spread fire, or homing bolts. Something that guarantees a good chance of a hit.

I think NPCs don't cast calm and other mind altering illusion spells simply because they are not hostile effects, and that there are none in the enemy spell leveled lists for obvious reasons, the fact that it would have no effect on the player anyway seems irrelevant to them.
This is giving me some wacko and unpractical ideas (my favorite ones!). After all, I think it is now possible with the OBSE control tapping and disabling functions to do some... fancy stuff.

So... a lich casts a command spell at you. You fail a willpower check. The lich approaches, and all you can mutter is 'I hear and obey'...
Or a vampire casts reign of terror on you, and suddenly you are running for your life and yelling terrified...

I doubt it can be done in a too slick fashion, things like turning the camera and running in a particular direction only with scripts seem a bit difficult to pull off. EDIT: http://www.tesnexus.com/downloads/file.php?id=32828

Well I played a hella lot of NWN before discovering TES and I really liked the fear spell when cast on the character and succeeds you lose all control and they would go hide in a corner till it wore off or dispelled.

I can think of other effects too, but gotta run now - more later if interested.

Yep. I bumped bolt speed up to 2.4 or 2.5..... whichever. Makes NPC spells significantly more difficult to dodge.

I also make sure that I have some area of effect spells. They don't have to hit a target, they go off as soon as they hit anything at all..... so, when some NPC is around a corner, just aim an AoE spell as far in as I can get, and most of the time, I can take 'em out. In larger areas, lead the target a bit, and the AoE will invariably include them when it goes off.

I don't like playing in third person, and I tried dukes combat geometry mod. Holy crap. At low levels, ANY conjurer was a serious threat. You couldn't get to the conjurer without going past the conjured..... which would then be behind me, and one-hit me. If I tried to take out the conjured first..... conjurer would just generate another one.... made for some truly difficult fights.