Someone found a way to fix the outdoor areas looking like crap when far away...but it does take a toll on your save/load times in the outdoor areas.
See for yourself
BEFORE : http://img.photobucket.com/albums/v456/enigmatic_cat/Oblivion1a.jpg
AFTER : http://img.photobucket.com/albums/v456/enigmatic_cat/Oblivion2a.jpg
http://www.elderscrolls.com/forums/index.php?showtopic=276393
See for yourself
BEFORE : http://img.photobucket.com/albums/v456/enigmatic_cat/Oblivion1a.jpg
AFTER : http://img.photobucket.com/albums/v456/enigmatic_cat/Oblivion2a.jpg
http://www.elderscrolls.com/forums/index.php?showtopic=276393