Im getting so irritated with my game.
Don't get me wrong i love the game and have completed it many times, but it wont let me drop anything please help because I'm trying to decorate my house and stuff and i cant do it. also i have about 90 saves where I'm encumbered.

Please help!

You wouldn't by chance be running Shivering Isles? I believe I read something about a major bug in Shivering Isles that caused this problem. The solution came with the latest official patch for it, though I'm not sure how the patch will effect your saved games. Assuming this is the problem.

Na I haven't installed shivering isles yet. I got it on x box and didn't really like it so i couldn't be bothered to install it. Thanks though.

Hmmm... That is a bit strange. I never encountered a problem like that. Two things come to mind that may be able to help you move around again.

1.) The Unofficial Oblivion Patch.

It fixes a lot of bugs, and this could be one of them for all I know.

2.) The Bag of Holding mod

Now this item is kind of a cheat item, but I've been known to use it when I simply have too much stuff I've collected and nowhere to put it while say, in the middle of a dungeon. Basically it's like having a chest with infinite space in your inventory. So if you are over-encumbered, and can't make it to any storage containers to drop the weight you can put some items in the bag, and regain movement.

Hope this helps.

No i need to be able to drop items. for some reason it wont let me.
Whats the hot key or is there another way of doing it.
Thanks for the advise again though.

In the inventory just click on whatever you wish to drop and don't release the left mouse button, it should then exit the inventory, but in this mode you can still move it around before it drops, like when you move things with the z key.
Or just shift click on whatever you wish to drop, then the item will just fall to the ground when you close the inventory.

Thnaks everyone who posted, its still not working so im going to reinstall it, but thanks for the help!