I don't want to start with too many mods. I want to play an archer, and since archery svcked badly in vanilla Oblivion, I obviously want to do something about that. Any tips? I would also like the standard better faces, bodies, world texdures, etc. I think I'll just start with that and then slowly add more.

Being a disc copy, are there any special instructions for installing it on Windows 7?

Nope nothing special for Windows 7, you do know how to add mods right? (Same as Skyrim)

Nope, nothing special needs to be done under Windows 7.

As for a place to start, I recommend the old FAQ pinned at the top. It won't give you mod recommendations, but it will help you get back into things.

No I actually don't know how to install them yet, but I am reading what info I can find on that as we speak.

So I can just install the game in program files and it will be fine? I was told that Morrowind had to be installed anywhere BUT program files.

No, Program Files is not fine.

I actually haven't used Program Files for games in about 15 years after experiencing some issues under Windows 95 with that path.

So will C:\GAMES\Oblivion work like I did with Morrowind?

Yep

Also, please see the FAQ at the top if you haven't done so already. It'll help.