I didnt know about the choosing their appearence thing. I just started playing as a level one and did a part of the mainquest where you close a gate near a town. I go there and go in even though im scared the dremora will kill me with superior aromor and weapons. I kill them all and search them. No armor! I had no idea. Then i saw he dropped his mace. I go and i take it and have a deadric mace. With 4 damage on it. I used it before I got the blades sword. Looks like I was killing naked demons projecting the "image" of armor.
Another time was when i first started. The assassins everyone talked about looked like dremoras with dremora armor. They die and... turn into humans with worthless clothes.
Last one was, to make a long story short, I sold my pants by accident.
I also opened a 4 tumbler lockpick in a place with 8 gaurds on patrol to open a glass case. Then i opened it and removed an ebony axe and glass dagger. I look and find out they were imitations with no attack or price, just weight.
Well, you can post your Oblivion moments like these here.

So the weapons in the display cases are just for show. That's good to know. I hadn't tried it yet but I was sure I was gonna get kicked out of a guild or two trying to get those things.

No the blackwood sheild is the best one I found yet and it was in a display case. I also got good soulgems from the mage guild place. You wont get kicked out unless the thing you are taking has a red hand over it. Im not sure about picking locks though. I got into thieves guild by taking free things in the mages guild for uh... free.

Something else happened today. I knew scamps are much harder now. I was exploring and find a new gate. Then I see a fireball and run, fearing legions of scamps. I ran to a abandoned house and locked myself in. Then I leveled up a few times by practicing magic. I run out and catch fire. This was normal because I was a dark elf but I still hated the scamps. I look and I find... 1 scamp.

HAH HAH........well, I had something else. I was this big uber nord in lovely iron armour(level 3)....and I was walking in the lovely forests...there i found this Argonian. thinking he was an easy bait, i attacked him...found out he was a fully fletche battlemage, with a nasty habit of knocking me down with his fist...then, when i was laying on the ground, he sent fireball after fireball at me...I was dead within half a minute....

When I went to Oblivion for the first time, I wasn't afraid, coz I had done some other quests before the mainquest. I was OK untill my sword broke and I had no repair hamers, so I picked up one of those dremora maces. The problem was, I had 10 in blunt, so if there was more than one dremora I had to run like hell after killing one of them

Once before I "stole" (Moved in game... how is that stealing?) a piece of lettice, and when a guard got me I chose "Go to jail" because I thought that because the "Pay fines" option was grey that I did not have enough money... I had a couple thousand...

I felt stupid at the very begining.

When I had to ask Emperor Uriel Septim who he was.

I should know who my damn emperor is, damnit!

Another time I found this fort and kinda went into it (not the interior cell part, the parts outside) and stared in awe then this wolf flewout of nowhere and bit me in the boat. Goes to show you - never sheath your weapon so you can stare in awe. Something will bite your boat off.

Well, i found my darkwood sheild, a realy good one in a display case right. So Im checking all the cases I see. I find one with ebony mace, sheild and gloves in it. I have 2 lockpicks and its a very hard rating lock. I spent a LONG time picking and reloading. When I got in, it was ceremonial gloves and sheild. However, I kept the gloves because my imperial legions had the same defense.

I've never really had any trouble with picking fake items out of display cass.