Ok so this is happening on both of my computers where after maybe 5 minutes into Oblivion the controls will stop working; keyboard and mouse. The game itself is still running fine I just can't do anything so I have to Alt-Tab out and close the game through Task Manager.

I looked on the FAQ and changed the joystick command in the txt file and that didn't work.

In the past, this was commonly a sign of having too many codecs. Oblivion and pretty much all bethesda games are picky about codecs. Might want to give K-Lite's Codec Pack a shot as that was commonly used to fix this issue in the past:

http://www.codecguide.com/

Oh and this was mentioned in the FAQ as well.