I think any open game like Oblivion MUST have level scaling. If the monsters did not scale, then you'd have areas with hard enemies that are effectively out of bounds to low level characters, which would pretty much force linearity into the game. With level scaling, you can travel anywhere at any time, and always encounter monsters that are both not too hard or too easy to kill (provided you built your character by playing and not holding down the 'c' button for a day, of course).