http://i.imgur.com/mI1Viau.jpg

I don't think it has anything to do with her head's size. Anything bigger than that would make her look like the more potato face'd npcs in Oblivion.

Looks fine.

Is this just in the character screen?

It's probably just the pose that's contorting everything. I had the same problem with my character but she seemed much more proportional in-game than in the journal.

Nice looking character. I'll swap you one of my companions for her. Her neck looks ok from here.

The character models have weird proportions in Oblivion. Try wearing some pants on and then look at your character in the Tab menu. The length between the foot and the knee looks totally weird.

Not the greatest picture but it looks about right for the game.

Can't really tell, you only see their backs in game.

Maybe I could check by leaving her standing in one place until the screen starts rotating.

I think there's a button you can press to swivel the camera so it faces your character's front. I do that a lot, just press down the left anolog stick on the 360 or tfc for the PC. Not sure what the button is for the PS3, though.