What are settings that really decrease performance? I'm almost outside!!!
Open your Oblivion.ini file found in the saved game folder in My Documents, edit the MinGrassSize and increase its value to 120 or even 150, that should give you a good boost in the forest area.
I also disable shadows on grass, altough I leave all other settings maxed, one other thing that may help in the forest is decreasing the size of the texture map trees uses for shadows, there's an entry in the .ini file for doing it, I decreased from 512 or something to 256, or even try 128 if that doesn't help too much, you won't notice much of a difference in the IQ, but you may squeeze 1~2 more FPS from this tweak.
There's a mod that significally improves the FPS at forest areas, by reducing the amount of polygons used to render the grass (grass it seems, is the biggest FPS killer while being outside for this game), you can find it here:
http://planetelderscrolls.gamespy.com/View.php?view=OblivionMods.Detail&id=1479
Some ppl are experimenting with mods that reduce the overall amount of polygons used in Oblivion, without sacrificing the IQ it seems, I haven't tried any of those mods yet, as they seem to have too many bugs at their current versions, feel free to check from time to time on their progress, as this will enhance your performance by a great margin hopefully.
Finally, if you are into using mods, I could recommend some I use in my game, especially Oscuro's Oblivion Overhaul 1.31, the Unofficial Oblivion Patch 1.4, Oblivion Stereo Overhaul, Parallax Mapping for all Textures (almost 1GB download), enchanced LOD textures for the long distance terrains (about 200MBs of them), and Natural Environments for an overall enhanced IQ while being outside, get them all here:
http://planetelderscrolls.gamespy.com/
Here's a list of recommended mods as well, unfortunately, as of August 25, it has been discontinued by the author, but you can still find some gems there:
http://www.elderscrolls.com/forums/index.php?showtopic=515789
After using these tweaks, I can play with all settings maxed (all sliders at max), except for shadows on grass, at 1024x768 using HDR (no FSAA of course), and getting 60~80 FPS indoors, 30~35 at cities (except for Cheydinhal and Skingrad, which always are on the lower 20s in my system), and 25~30 FPS while being in heavily forested areas.
Btw, be prepared for a feast for your eyes once you go out there
I spent about 10 minutes just gazing and drooling at the sunset near Imperial City once I got outside the first dungeon, even my wife was sitting by my side amazed by the show
Hope this helps
EDIT: Almost forgot, be sure to check this guide for a lot of tips on tweaking Oblivion, it is a must!
http://www.tweakguides.com/Oblivion_1.html