I have it installed to C:\Program Files (x86)\Bethesda Softworks\Oblivion. No issues whatsoever.
This is where I have mine installed too.
Thanks for bringing up the patch because I forgot to mention that I can't install any patches as I keep getting an error. I have The Knights of the Nine expansion pack (The one with all the official DLC on CD) but I can't install the 1.1 patch on there, which says I have to install it prior to installing the DLC. The error says: Old file not found. However, a file with the same name was found. No update done since file contents do not match.
After I kept getting this error, I still went ahead and installed Shivering Isles as well. I guess this is where my issue is occurring because some mods may be dependent on patched content. Is there another patch I can download to get around this? Is there something I can do to make the patch install correctly and, excuse my ignorance, but what's UAC?
Thanks heaps for the replies so far. As I said, I'd really appreciate any help in getting this resolved.