1) Delete the 'Windows\Temp' folder or at least those files that can be deleted, and do the same to your 'documents and settings\_User_Name_\Local Settings\Temp' folder
2) Delete the 'C:\program files\Common Files\InstallShield\Professional\RunTime' folder
3) With the Oblivion disc in the DVD drive, right click on the drive in My Computer, choose 'explore' and then double click on the 'DXREDIST' folder. Then double click on the 'DXSETUP' or file. This will start the DirectX setup program. It's important that this step is taken, even if you've got a newer version of DirectX installed. The newer version won't be overwritten but the installer will let Windows know that it's been run and that should stop the Oblivion installer from trying to run the DirectX setup and hanging again,
iv) With the Oblivion disc in the DVD drive, right click on the drive in My Computer, choose 'explore' and then double click on the 'setup'. There are six 'setups' on this part of the disc, and if you are a computer neophyte then the one that you want is the one that has the blue icon that has two white arrows pointing the lower right hand corner of the icon, this icon is always used for InstallShield programs so is usually the one you want to click on when doing a manual install of anything. Install Oblivion to exactly the same location on the disc as the previous install of Oblivion.
v) The Oblivion installer should run all the way through without hanging up. If it does manage to do this then Oblivion should also uninstall without any problems.