When the setup asks for disk 2 and I put it in it downloads a few things then I get an error and my only option is "ok" witch ends the installation. When I put in the disk and try to open the archive it says it's either an unknown format or damaged witch I guess is where the error is coming from. How can I fix this?

Edit: Now I'm getting an error in disk one saying "The request could not be performed because of an I/O device error" I never got that one before, what's going on?

Edit 2: data1, data2, and data3 are all damaged...

Try to clean the discs with a soft cloth, your issue might be dust buildup in the dvd drive, and not the discs, I use a CO2 cartridge to blow the dust out occasionally on my desktop.

I just got my Oblivion disk one resurfaced today so it's spotless but disk two is visibly dusty with little to no scratches, so that solves the data3 problem but I still don't know how to fix the problem with data1 and data2, I fear the worst...

Have disk 2 resurfaced as well. Also might want to clean your DVD drive.

I know this is little late how about copy the disk into your hard drive.