Then I went afk and shoved something in my keyboard to shoot my firebolt into the corner of a room. I came back later and I could 1 shot everything.
Destruction magic does not level up unless the spell actually affects something, which is why powerlevelling the skill requires you to use 'on Self' effects. Please do not tell lies on the internet!
Archery is better since you can collect misfired arrows as well as reliably connect with sneak attacks. Indeed, I'd argue that consistent sneak attacking is the primary benefit of Oblivion's 'always hit' combat. Magic is better insofar as quick casting allows hybrid classes to function more effectively and magicka regeneration lets you use it more easily as your primary method of dealing damage, but there are less available spell effects and therefore less imaginative combinations available to the player. The lack of slowfall/jump/levitate also ends up making dungeons far more boring, since they're all navigable by every type of player and there's never any sort of roadblock that can stop you from being able to progress. Well, I guess there's one or two grottos that might require waterbreathing. Morrowind never really took advantage of this either, to be fair.
Playing Skyrim as a sneaky elf who one-shotted everything from a mile away with perfect arrow shots was pretty fun. I mean absolutely broken and not really "RPG-y" at all, but kinda fun. Wears thin eventually though of course. I also made a spells in one hand and short sword in the other character, which was much more boring due to how the enemies barely react to being hit. The fun of making your own wacky spells, as you describe, was mostly removed iirc.
Stealth is one of the few things in Oblivion and Skyrim that is objectively improved over previous games, even if it makes things too easy. I'll give Oblivion (and even Skyrim, really) the benefit of the doubt in this regard - there were basically no games in 2006 that let you traverse an open world while playing as a sneaky, Assassin type character. Even by 2011 it was still pretty rare, with the current style of Far Cry game not really codifying itself until Far Cry 3 in 2012. That, combined with the better-than-average questlines for stealth factions like the Thieves Guild and Dark Brotherhood, is probably why so many normies enjoy playing stealth characters in Oblivion and why Skyrim's "stealth archer" meme probably doesn't bother them at all. It's what they wanted to play anyway.
I enjoy games for both the gameplay and the immersion/atmosphere, and Oblivion fails spectacularly at both. The combat system might be, at its core, better than Morrowind, but only barely. On the other hand, the stats and skills were dumbed down
How were the skills in oblivion dumbed down? oblivion skills unlock special abilities, morrowind's are completely shallow.
I would rather have more avenues for player expression in the form of different skills than clunky power attacks for four combat skills. Oblivion is missing Spears, Crossbows, an entire branch of Alteration spells in Jump, Slowfall and Levitate, teleportation spells for Mysticism as well as missing 'Detect' spells or enchantment, keys etc. and various Illusion effects relating to the dice roll mechanics (Sound, Blind, Sanctuary). To its credit, Oblivion DID add Reflect Damage to make melee combat more dangerous, compared to Morrowind where using spells was an exercise in trying to avoid nuking yourself with Reflect and melee was 100% safe, but then they didn't make it available to players as an actual spell or enchantment. Throwing all of the weapons into just 'Blade' and 'Blunt' was a travesty too, especially since it was about the laziest way to split everything into two different weapon types.