I think that Oblivion's leveling system (along with FFVIII's made me realize that although grinding does suck, the main joy a
and theme of an RPG is starting as a weak character and developing into a powerful one).
I think that instead of changing the leveling system, dvelopers should simply make combat more unique, and also add an abundance of side quests and exploration. I just love to sometimes hop on a horse and explore every new dungeon I encounter in Oblivion. Although I may be facing the same exact enemies in yet another identical dungeon, playing as a stealth character allows me to feel like every assault is a new situation. Whether it maneuvering towards the perfect sniping spot, scouting where the enemies are, who to kill first (the mage who can summon an annoying pet, or an melle character that probably won't die with one arrow?), whether or not to apply poison, etc.
So my point is, don't worry so much about the system. The developers only need to have a foundation that allows every battle to feel unique, to encourage random exploration (instead of just running in circles), and IF possible more side quests (although XII's side quests were a bore...)
