Yup. This is really killing my desire to play. Some of the posters in the thread nailed it on the head - there's absolutely no 'fear factor' involved. Every time I enter a mine/dungeon/etc, I know that I'm going to be able to beat everything in it. I don't have to worry about running into some really tough monster because, hey, they scale to me.
The whole point of dungeon crawling is the suspense. "Can I beat whatever is around the corner?" "What's in the chest at the far end of the room?" And so forth. But I know I can beat everything, and there's going to be 9 gold in the chest. So what's the point?
I'm really hoping this is something that modding can fix. Minor quibbles with the interface aside, I think this is the single worst part of Oblivion. It absolutely will kill any long-term appeal, at least for me.