I'm pretty new to Oblivion, and I started with Skyrim first. The stealth system in this game trips me up a bit.

I can't seem to kill anyone, even a beggar, in one hit, no matter the weapon. This has naturally made starting the Dark Brotherhood questline really, really hard, and virtually impossible for me to do any true stealth runs in most dungeons (dungeons filled with necromancers/mages tend to be really easy, though). Is Oblivion's stealth system just not made for this kind of thing? At this point, my re-rolled first character is pretty much a mage that is stealthy for the first hit and then blows people up with fireballs until they die.

Somewhat related to this, what's the point of using daggers in this game? When I CAN get close enough to backstab them, it still doesn't kill them in one hit and they notice me instantly, so what's the point when I can just sink a well-placed arrow into them and have more distance to fight them with?

I swear, I'm totally missing something. My absolute first character (a...very bright blue Argonian) got to LV50 in Sneak and I STILL couldn't really be viable as a stealth character.

I think it's more about getting a strong opener in a fight, than one-shotting peple. And, if I'm not mistaken, swords have the same damage multiplier? So there might not be much reason to use a dagger, beyond powerful unique ones. Also, you'll be able to kill common-folk easily enough with some time. I think most are around level 10, but they don't level up with you.

I always had better luck with a "Witchhunter" kind of build. Archery/Alchemy for the stealth part, and Destruction touch spells for direct engagements.

Invisibility can help you bypass fights you don't think you'll win, or you'd waste too many resources to down. Be it from illusion, alchemy, or bought from certain unfriendly NPCs.

I'm wondering what you mean by "no matter the weapon." What kind of dagger are you using, what kind of enchantment is on it, what kind of poison is on it, what's your Blade skill level, what's your Sneak skill level, and what kind of enemy are you trying to "one-hit"?

Also... Is your weapon in good repair? Are you wearing armor, or trying to run while sneaking? Is it dark? Are you actually behind the person or creature? What's your Agility level?

There are a lot of factors that go into the damage you do, the likelhood of you being detected before the hit, etc. Are you getting the popup notice that you're getting the bonus for a Critical Hit?

A Sneak Attack at Apprentice level (or above) should cause 6X a one-hand weapon's normal damage on the first hit. Your skill level with the weapon, the type and condition of the weapon, and your Strength determine the actual damage the weapon does on strike, and then that number is multiplied by 6.