Would it be worthwhile to upgrade to a newer version of the 9 series catalyst drivers? I'm still using 9.4 simply because it's been problem free with all the games I play. My modded Oblivion (aprox. 130 mods so far) runs pretty well so far except for loading jags when traveling and the inevitable cpu bottleneck when I get a lot of humanoid actors on screen.
If everything work then no need to update, 9.6 may give you litter better fps..
I use the 9.12 drivers and they work fine for all my games pretty much.
Starforce9
Have you read this thread in relation to shadow with 9.12 Drivers..Textures Issue
I had the same problem with 9.12 on my 3650 has everyone else did using the 9.12 Drivers..
http://www.gamesas.com/bgsforums/index.php?showtopic=1062040
They may be better in other games but they do not like oblivion that much..
Corepc