Alright, I've been playing Oblivion for years (Xbox 360) and I've used the same character the whole time. I recently decided I wanted 100% chameleon, it took so damn long to practise illusion and find soul gems etc... Finally I enchanted 5 pieces of clothing and can now be invisible, but now I feel kind of bad because now nothing can kill me. Sure punching guards in the face is fun, but I feel like no I'm unstoppable. I need you fellas to help me make a decision. Should I get rid of my invisible outfit? (If so, how would I dispose of it so that I could never get it again) Should I lock it away? Keep it? I try to only use it in dire situations but I feel that it's just too much power.

Console or PC? If console, lock it away. It's an evil exploit Bethesda created there and you could as well run around in god mode. It's fun for a few minutes, but it gets old pretty fast. If on PC use mods to fix it. Like http://theelderscrolls.info/?go=dlfile&fileid=219 and/or http://www.tesnexus.com/downloads/file.php?id=34841.

Now that you have satisfied your curiosity, I see you have come to the same conclusion most of us share regarding a full chameleon suit. My advice?

Stick it in a respawning container or the corpse of a mudcrab. After three days it will be gone.

Go craft yourself a spell: Chameleon 100 x 6 seconds. That is plenty for those very rare occasions when you might need it. An alternative is to carry some homemade chameleon potions so you can briefly achieve 100 for those rare times you need it.

I think Bethesda should just set a max limit of 85% camouflage, like what they did for armour.
For that matter, resist/absorb/reflect magicka and reflect damage should all have maximum limit of 85%. They are way too powerful at 100%.

No real need, constant chameleon 100 is pretty hard to get and obviously gamebreaking. Reflect damage is far harder to get.
Easiest way to get 100% chameleon is a combination of potions and some random artefacts you collect.
Personally I find it hard to fight with as I can not see my weapon.

I quite like the lack of limits in the game. I'm perfectly happy to carefully evaluate things and set my own limits.

For example, I find simply having the short duration spell as a self-imposed limit far more fun that limiting chameleon below 100.

More examples of self-imposed limits that I use:
-The armor rating max is 85. My character dresses for fashion and normally has an armor rating around . . . 13.
-Attributes can go up to 100, but for my small and fragile glass cannon, she finds herself unable to ever increase strength or endurance - both are permanently at 30. Yet, we would be pissed if she couldn't boost her agility and intelligence to 100.
-Skills can go up to 100, but there are numerous skills, including blade, h2h, blunt, security, speechcraft that my character will never touch.

I would much rather pick, choose and decide my own limits than have the limit police of game mechanics help decide what my character should use and how to use it.

While I wouldn't use 100% Chameleon, I could certainly see one of my characters creating such an outfit. It's in the game, and yeah, it's gamebreaking. But for mischief? Oh hellz yeah. I've always left my chameleon outfit in a wardrobe in my house. It's nice to have if you want it, but I think I've worn it a grand total of twice and never with an RP char.

Buffy has used her 'Chameleon 100 x 6 seconds' spell about four times in her 600 hours. Her most recent use of it is detailed in this snip from Episode 68 or her journal:

* * *
I lifted my hand. Illusion magic traveled up my arm and escaped into a small emerald burst over my head as I opened my fist. A brief but total chameleon effect engulfed me and would preserve my secrecy, even while spellcasting. Stepping back into the open doorway, I pointed my unseen hand at Alessia Caro as I called forth and released Sanguine's Stark Reality.

The chameleon effect did indeed prevent my detection as the Countess and her guests were stripped of their clothes. Pandemonium broke out as they began to run around the room, confused. The door from the great hall flew open as several mail-clad guards poured into the dining room. I was thankful to see that Stark Reality's effect had not ranged beyond the dining and cooking areas. I quietly stepped away from the doorway and back into the kitchen.

Within a few moments, my hands reappeared, as did my arms, legs and everything else that had been previously covered by my gown.

As I went to rejoin the guests, one of the guards brushed past me, trying to avert his eyes from my nakedness and saying with a red face, "I'm so sorry, Dame Buffy. We have no idea how this happened. Don't worry though. We'll catch the perverted scoundrel!"

* * *

It's your decision of course. But since you ask, I say

Destroy the evil thing! :chaos:

Maybe donate it to the Mages' Guild by dropping it in a respawning chest in a Mages Guild Hall.

My Dunmer Lothran has three jewelry items, each enchanted with chameleon 20%. He has grown tired of battling the inhabitants as he is exploring various caves and ruins.
That′s more than enough with 60%, but if he needs more (like in well-lit areas where he′s not supposed to be...) he has an additional spell with 50% chameleon for 120 secs

You're right! its to much power and thats not so interesting.... with that power the game is getting bored so... don't keep it...
Thats my advice... You follow it if you want...