I would appreciate advice (from those of you who are very experienced with Oblivion mods), on which mods would produce the following modifications to the game:

1. Increase game difficulty but in a common sense manner. i.e. the larger the enemy - the more strength etc.
2. Increase realism, but nothing that causes a disruption of game-flow - where the game becomes a micromanagement nightmare.
3. Graphic enhancements (all kinds), but with the aim of getting the most bang for my buck - visual improvements vs how much they tax my computer.
4. Increases strategic game-play. I enjoy mods, which add levels of complexity that require strategic play in order to overcome them.

In the past, when I tried to mod the game, I was overwhelmed by the sheer number of mods to choose from. Determining which ones conflict with each other etc is a process which is far too tedious for me. So my hope is that some of you can offer some advice/suggestions of a combination of proven mods that will help me achieve the modifications I am looking for.

Thanks

You could try FCOM (or one or more of it's components, OOO, warcry, francesco and MMM) or TIE for the points 1, 2 and 4 (TIE is less demanding and I think is easier to instal, not sure as I had only tried FCOM).

TIE is much much easier to install. I would check that out as well as OOO, and see which one the OP prefers as they are both very different.

'Duke Patrick's melee combat' is a mod that covers your points #1, #2 and #4. As the name suggests this mod modifies melee combat in Oblivion, turning it into a much more tactical and realistic experience.

First of all, the mod incorporates locational damage, meaning that blows at certain parts of the body (like the head) will be deadlier than blows landing at other parts. This sole feature adds a layer of strategy to combat: now where you strike is important.

Second of all, and to compensate for the fact that weapons can deal more damage, now cleanly hitting an enemy is much more difficult. This happens because enemies are more intelligent: a better AI makes them be more defensive (they keep their shields up instead of stupidly charging at you) and more tactical (they move much more, trying to circle you to find your back etc).

And third of all, you have new techniques that you can use: you can parry incomeing attacks by blocking just before they land, you can bash with your shield/weapon to stagger or even knock down yout enemy and, most importantly, you can trick your opponents by performing faints (example: you start an attack aiming at a bandit's feet and you finish it at his head. This may trick the bandit to think that you are attacking his legs when in reality is his face what it's in danger!)

If you are interested, this is the link: http://www.gamesas.com/index.php?/topic/1209130-duke-patricks-melee-combat-no-recoil/
Also, Duke Patrick has similar mods to make archery and magic more tactical and realistic. Check'em out

I favour Revised Oblivion Mod (ROM) and Tamriel Immersion Experience (TIE), currently together. With Martigen's Monster Mod (MMM) as well, actually.

If you also choose to go that way, I think you will find that that which might normally have been a walkover in the "vanilla" game, suddenly requries caution and even (gasp!) thought, from time to time. Regardless, difficulty levels can be said to be higher, I think it is safe enough to assume.

Graphical mods that might not impact upon FPS too greatly? Some of the Oblivion Graphics Extender (OBGE) shaders, perhaps. Also, you might look at the Vibrant Textures pack (which should have zero impact) and/or Bomret's Detailed Normal Maps for Vanilla (likewise). Trying a 1024x1024 distant LOD package might prove a happy medium, but of course, the only way to truly tell is to try. There are some mods that can help with graphics performance, regardless of the textures/shaders/other you use: Streamline and Oblivion Stutter Remover.

Luckily, if you install (and uninstall, where necessary) via BAIN - Wrye Bash's installation method - you are free to mix and match, change your mind, start over, and so on; all without hindrance or worry.