Your biggest problem is caused by loading Oblivion in the default directory. When you do, Vista UAC will not allow changes to program files there. Not Bethesda's fault, Microsoft did it and recommends that files be installed there.
Quoted from the Oblivion Mods FAQ WIKI
Using VISTA only: If you have downloaded and installed, and the mod is appearing in your Data Files List, but not in your game. Then you should reinstall Oblivion into a different directory instead of the default.
Installing mods on a Windows Vista system is bit trickier than it is on Windows XP due to Vista's increased security.
For best results, it is recommended to install Oblivion to a location other than the default C:\Program Files\ folder. Another location such as C:\Oblivion\ or D:\games\Oblivion\ will work better. This will avoid the file permission problems many users have experienced due to the increased security restrictions Vista places on the Program Files folder.
Wiki entry on installing Oblivion in Vista:
http://cs.elderscrolls.com/constwiki/index.php/Windows_VistaThe alternative is disabling the UAC, which is a Vista security feature. If you decide to risk shutting off the UAC instead of reinstalling, look here for instructions on how to turn it off.
http://www.howtogeek.com/howto/windows-vis...-windows-vista/Note that there are 2 English versions of Oblivion, The UK and the US and they use different patches. ( I bet you thought it was the same language) However, I do not believe the game of the year version needs the patch, either for Oblivion or Shivering Isles
Many newer mods, especially the larger ones require OBSE (Oblivion Script Extender)to work. If you load the mod without OBSE it will crash. OBSE is not a mod and does not install like a mod. Please read the instructions before installing. It is available at the author's site here:
http://obse.silverlock.org/I also recommend OBMM (Oblivion Mod Manager), again, not a mod, but a program that will make working with mods easier. It works well with OBSE and is easy to install- available here:
http://timeslip.chorrol.com/Download and use the self installer version.
Be sure you have the latest version of Glenvar Castle. I think it is one of the best mods available.
That should get you started on playing with mods. Please feel free to ask if you need anything else.
Again, welcome to Tesnexus