Oblivion and t2300
CPU Issues: Oblivion is a CPU-intensive game. There is a great deal of complex physics, quest states, weather states, and artifical intelligence data for example which is being crunched by your CPU at all times, much of which cannot be scaled back. As such, many systems are currently limited in performance by their CPU - i.e. even with a high-end graphics card, you may be experiencing reduced performance because your graphics card ultimately has to wait for information from the CPU. The best way to determine this is if you notice that changing the graphics settings has no major impact on your performance. See the In-Game Settings and Advanced Tweaking section for more details of settings you can adjust to reduce CPU load and make better use of Dual Core/HyperThreading CPUs. In the end, some people may have to consider a CPU upgrade, particularly as Oblivion is not kind to overclocked CPUs which can generate a lot of instability due to the excessive load (see below).
With that being said, you should go CPU shopping. This may also be why I have an OC'd 7950GTX and still bog down during battles. Hope this helps.
I have the same proccesser and and i have 1gb ram but for same reason the speed of it when i checked my computer info was 1777 and i have t2300 centrino duo i also play oblivion and i get 80 fps it doesent lagg at all and even when i am in a battle the fps juest drops by 1% well not even that it doesent lagg so what i preffer is some ram extra ram and maybe get a slitely better proccessor mine can even run left 4 dead with no lagg so i am pretty sure u should add more ram or maybe upgrade your proccessor by a bit or if on a comp thats a bit modern in cooling i preffer overclocking and get Game booster i preffer getting pre alpha or the newest razor game booster these are awesome softwares it makes my comp super fast