I'm almost at max level. My character is melee-only with the exception of healing and defensive spells. For the majority of the game I played on average difficulty because it was challenging for me. However, I've almost run out of stats to level up, but there's still a huge amount of the game to explore, as I spent most of my time in the Shivering Isles DLC.

The problem is, that with my equipment and stats, enemies barely damage me. When this happened in Skyrim, I maxed the difficulty and it was a blast. But in Oblivion my defense is far better than my offense. I have the best version of Dawnfang/Duskfang, but if I upped the difficulty enough to make the game a challenge, it would take so ridiculously long to kill things it'd become extremely boring.

I really love the game, and don't want to quit playing with so much more stuff still to explore. Is there any way to do more damage at nearly max level with the playstyle I have? I'm aware I could make my defense worse to compensate for my offense, but I'd hate to do that, especially with how satisfying it was to slowly get stronger over the course of the many hours I spent playing. I don't want to throw away the rewards of my hard work just to have more of a challenge; I don't feel that's how games should be.

EDIT: I didn't realize initially the potential spoilers that could be posted in followup comments due to the nature of this post, thus rendering its proper place in the Cheats, Hints, and Spoilers section of the forums. If the mods would be willing to move this I would appreciate it, and I apologize for the inconvenience.

It seems to me that you have put yourself in this position. You equipped the best gear you could find and now you're complaining that the best gear you could find ruins the fun. Yet you don't want to un-equip the best gear and you also don't want to increase the difficulty. What are we to say?

Are you on PC? If so, you could use mods to increase the difficulty (this is better than the difficulty slider anyway).

Poison your blade or self enchant a more powerful weapon. Either of those will increase your damage output substantially. That sword you are using is okay, but fairly weak compared to a good self enchanted sword.

Here is a link to the USEP page that talks about how to create self enchanted weapons with weakness stacking. Such weapons have sufficient damage output for you play at max difficulty. But you will need to fill a lot of soul gems since they use a lot of charges.

http://www.uesp.net/wiki/Oblivion:Useful_Enchantments