If it don't run good at default settings, then there's things u can do to up the performance some.

If u get a lotta lag try first turnin off grass rendering and distance rendering (or lowring it). The grass u can turn off via the command console (~). "tg" I think is the command.

Distance rendering is in the video options area.

Another thing is to lower resolution. Run it at 800x600 or somethin instead of higher. And then reduce framerate if u can...this helps a lot. U can play a game easily at 30fps even tho it don't look quite as smooth as 60fps.

U can also run the game in "lightbright" mode. I forget the command for this, but basically what it does is deactivate shadowing and reflection.

Not going to lie, I freaking love oblivion. I'm not sure on oblivion's spec requirements, but I know that your RAM is fine, however the Radeon HD should have it run smoother, even if there is a little lag. However I would suggest you take a look at the specs requirement beforehand.