Last week I started a new game of Morrowind. I took my level 2 character on what I thought would be a short little jaunt around a few islands near Seyda Neen. I quickly got pinned down on a small rock outcropping and I swear it took me 30 minutes, real time, to get off that rock. I'd swim a few feet away and a Slaughterfish would swim up. I'd kill him, swim a few feet, and another Slaughterfish would swim up. By the time I finally got off that rock I'd piled up six Slaughterfish corpses.
So I get to the next island, run to the other end, get in the water, and three Slaughterfish swim up to me. After killing them I dash for the next island, but two Slaughterfish ambush me from behind and kill me. I reload and try again. I kill those two and another Slaughterfish swims up. I get this one down to half health and my weapon breaks. Wonderful. Now I'm marooned off the coast of Seyda Neen with no weapon and no way to get back to Vvardenfell alive. My character is still there now, as I type this.
This exact thing happened to me a few weeks back, except it was crossing a certain river trying to find a certain tax collector. I ended up needing to go the long way around after dying three times. I never found the slaughterfish in Oblivion to be particularly annoying, but after playing Morrowind I have a whole new appreciation for them.
Oh, and as for your original question: If you can't paralyze them like Acadian suggested, your only real option is hacking away at them. Generally you should be able to outswim them with the help of healing magic/potions, as they stagger you as much as they did in Morrowind. But if you're really having trouble with them and don't want to turn the difficulty down, the only real thing you can do is to avoid them, as Oblivion's water combat is a bit lacking.