Your hit box definitely didn't stay the same in Oblivion. There were multiple times where I would have to crouch to walk underneath objects. And basically every single game ever has you crouching when you're "sneaking." If you walk really slowly up behind an enemy they still won't turn around if you have a high sneak level, you just won't get any critical damage bonuses if you attack them.

There was nothing wrong with Morrowind or Oblivion's "sneak" mode.