I would like to ask - Does Obl. need Windows XP Mode ?
Nope. The only precaution I take is installing it in it's own folder, rather than Program Files (x86). But I do that with all of my games and it has nothing to do with compatibility.
I would like to ask - Does Obl. need Windows XP Mode ?
No, but to avoid Windows 7 issues, install it to someplace other than the default "Program Files" location. Somewhere like "C:\MyGames\Oblivion\" works fine.