Those two highlighted parts of your post sorta contradict eachother. In 1 on 1 fighting, two well trained swordsman likely would be fighting for minutes before one was able to kill the other. Also don't forget almost all enemy in Oblivion that took a while to kill wore armor... and that would certainly prolong a real fight. So saying you want the combat to be faster, and not lengthy,. yet more realistic... doesn't make much sense to me.
Problem with Oblivion is that many enemies get loads of health at higher levels so you need to hack at them a long time to kill them. Increasing difficulty and you do less damage pretty dramatically so you has to hack forever.
Goblin warlords, wraiths and other boss level enemies does not have armor just lots of health.
An related problem is that in Morrowind, Oblivion and Fallout you gain more health as you level up, health gain increase as endurance goes up and if you concentrate on raising endurance you ends up with over 300 at level 20 in Oblivion, probably over 500 at level 30, now add a good armor and you get very hard to kill.
And yes two swordsmen will fight for a good time in a duel if both are good at blocking and have good armor. Fight ends then one manages to do a hit at a weak spot, hurting the other enough to have him drop the sword or fall so you can move in and kill. Fatigue is also important here as they react slower then worn out.
A battle will be more violent as you can not concentrate on blocking all enemies, one other enemy might get a hit on you while unoccupied and you are busy with another enemy.
For the difficulty slider, just make the enemy do more damage at higher difficulty and you more damage at lower.