Does music and sound work in general, other than music in Oblivion? Like, music and sound in other games, playing MP3s, other sounds in Oblivion, etc., etc.
If so, have you at all modified the Oblivion.ini file? And if so, delete it (the one generally found in My Games\Oblivion, that is). Then start a new game - this will regenerate the ini - and see if that helps at all.
If it doesn't, or if you haven't modified the ini, or installed any weird mods that do stuff to music, or whatever, maybe try K-Lite Codec Pack (the latest Mega version, IIRC) and run "Quick Codec Config", choosing "detect broken codecs and filters". Does that help?
Besides all that, could you post a dxdiag? You never know what will show up there...
edit: What is "nightmare2013's program" anyway? :unsure: And the "Installed Codecs program"...?