I just picked up the Oblivion Game of the Year Edition on Steam a month or so ago, and I am now getting around to playing it. I could use some help in picking the right mods to get going. I am very ill, so I don't want to go nuts. Dealing with a lot of mods is taxing.

My observations from Morrowind are:

Leveling system is awkward. GCD was awesome for that.
The game got too easy after level 20

Are those things still true for Oblivion? If so, I want to address those. I don't think I want content mods at this stage as I haven't seen the game at all yet. I will be happy with it "as is" for a while I imagine.

Thanks!

Well, the levelling system is more or less the same as Morrowind, so you'll want to find an Oblivion equivalent to GCD.

nGCD!
http://oblivion.nexusmods.com/mods/14065

Oblivion's difficulty scales with you past level 20, although many creatures are capped at lower levels. It will get easier, but the difference is not as dramatic as Morrowind where you pretty much become a god around level 20. One quirk of the levelling system is that equipment also scales, so you will eventually be facing off against bandits and raiders in full glass/ebony armor. The scaling also means that many missions are dramatically easier when you are playing a low level character.

This is (sort of) a content mod suggestion, but I would suggest taking a look at OOO (Oscuro's Oblivion Overhaul, for version 1.35 has just been released) or TIE (Tamriel Immersion Experience). Both mods attempt to make sense of the levelling system and bring back some of the more unforgiving flavour of Morrowind. Many dungeons and remote areas will be extremely dangerous until you are more powerful, bandits only wear things a bandit would wear and so on. Both mods also do a good job of hiding treasure in hard to find spots, so just like Morrowind, a very resourceful adventurer or skillful thief can find valuable equipment with a little bit of effort.

TIE is the less invasive of the two and probably better suited to stealth focused characters.

They are both compatible with nGCD.

If you prefer the classic RPG style leveling I recommend Oblivion XP. All the features are controllable by the ini settings and it should give you a leveling curve that you are looking for. Be sure to get the updated version if you decide to try that out.