Yeah added to both Video and Audio the first time around, no difference.
And no, the game just completely freezes, music stops and only CTRL+ALT+DEL will free me from it, where as i have to go trough the standared 'no response from' message and cancel the program to resume normal computer functioning.

Just as an experiment, try disabling music, and/or sound, in the oblivion.ini, located in my games\oblivion.

bmusicenabled=1
bsoundenabled=1

Try music first, then sound, then both. See if it changes behavior at all.

Sorry about the late reply, was a bit busy.
And again, no changing these things has done nothing, so ill go back to the beginning and state everything i do for installation because there are some things that don't go as normal.

1) Insert Oblivion DVD Disk and install game
2) Insert Knights of the Nine DVD Disk, running patch 1.1FinalEnglish fails because of 'old files not matching'
3) Installing the content one by one in following order: Knights of Nine, Orrery, Wizard's Tower, Vile Lair, Horse Armor Pack, Thieves Den, Mehrunes Razor and Spell Tomes
4) Insert Shivering Isles DVD disk and running the Installation fails on the grounds of its dvd protection failing, found a fix on gamespot of an fixed exe and used that, installation works fine after that.
5) After installation re-insert Oblivion DVD and run the game, All goes well up untill the point i click new game.

Do you have GOTY edition? Or did you pick up the disks separately?

If you have GOTY, install Oblivion, and then SI. SI patches the game to the latest and greatest. (1.2.0416) Then install the rest of the DLC. (don't worry about additional patches, you don't need them.)

If you DON'T have GOTY.... Install Oblivion, SI, and the SI patch according to what version of the game you have. (north american, UK english, etc.) Then whatever DLC you happen to have. With just those installed, see if behavior changes any. (patches are available from http://www.elderscrolls.com/downloads/updates_patches.htm...

I have seperate disks, got them off a carboot because i'm a cheapo and don't want to pay full price on steam.

Attempt #1
----------

Installed Oblivion
Patched Oblivion with V1.2.0416UK
Installed Shivering Isles (With fixed Exe, disk version won't work)
Tried to Patch Shivering Isles with ShiveringIsles V1.2.0416English, wich failed giving me a warning:
'Old File not found. However, a file of the same name was found. No update done since file contents do not match.' thus ceased the attempt.

------------------------------------------------------
Attempt #2
----------

Installed Oblivion
Installed Shivering Isles (With fixed Exe, disk version won't work)
Installed Shivering Isles Patch (v1.2.0416English)
Tried Patch from the Knights of the Nine Disk (Oblivion v1.1FinalEnglish) as stated on the Instructions, wich failed giving me a warning:
'Old File not found. However, a file of the same name was found. No update done since file contents do not match.'
Installed DLC from the Knights of the Nine Disk in order stated on the instructions.

Result: DeathCrash

------------------------------------------------------
Attempt #3
----------

Installed Oblivion
Installed Shivering Isles (With fixed Exe, disk version won't work)
Installed Shivering Isles Patch (v1.2.0416English)
Installed DLC from the Knights of the Nine Disk in order stated on the instructions.

Result: DeathCrash

------------------------------------------------------
Attempt #4
----------

Installed Oblivion, tried to see if it started a game to determin if its an addon causing the crash, however the Deathcrash happens with just Oblivion installed.

Oblivion version 1.0.228

That is just..... weird.

At what point is it crashing? Do you see the bethesda logo come up at all?

if you havent tried yet, try starting a new game after doing a cleen boot of the computer.
perhaps there is a running process that is making the game cranky.

EDIT: with just OB installed and fully patched.

I do see the bethesda logo yes, i go completly to the main menu, i can change options and look at credits and stuff, but hitting new game causes the crash.

Very wierd. Maybe you should try the Bethesda support http://www.gamesas.com/eng/contact_email.php and email Bethesda. Not too sure if they'll reply though.

He is running vista, which beth won't support......

As a grasp at the proverbial straw..... try reinstalling directx. The launcher is a separate program from the actual game, firing off oblivion.exe seems to be the issue here. What happens if you try the game directly?

@ hey you, i believe the op is having issues with the new game button in the game, not in the launcher (ei. continue-new game-load-options-credits).

@ op, as Heyyou stated earlier, it very well may be an issue with the video of the king that loads after clicking new game.
perhaps this is not a .bik file and is corrupt in some way.
does the game let you load a previous save (if you don't have one,, you can dl one from tesnexus.com)?