The Oblivion opening menu is a combination of 2D Bink Video (initial title logo reveal and background map) and GPU overlay (2D or 3D, depending on your settings) of the menu selections and title logo after intro, so it can look a bit wonky, depending on what your setup is and how things are configured. I play the game without VSync and it works fine, as far as the video stuff goes.

Thanks for the info! I suspected it was the combination of the background bink video and the rendered title text that was causing the problem. The gameplay itself seems to be running great without vsync but, during my initial research before installing, I came across many posts elsewhere about how Oblivion starts to get wonky when you exceed 60fps. Particularly the physics and AI behavior. If that's the case, vsync seems essential so I will continue to test things and try to resolve this issue. Might try forcing triple buffering and see if that makes any difference and if all else fails, I will try my GTX 580.

I was able to fix the issue by limiting the framerate to 60fps using Riva Tuner and then enabling vsync. Strange considering vsync should act as a 60fps cap but at least everything looks correct now.

New issue! While the game is running perfectly now, I'm getting flickering shadows on grass. Here's an old video of the problem:
https://www.youtube.com/watch?v=hZogc-R75sw
Tried multiple drivers, a GTX 580, an x1950 xtx, and an x1900 xt, with various drivers, and the issue remains. Any solution for this? I assume it's hardware or driver related, but I'm out of graphics cards to test. I'll probably just keep Shadows on Grass off, but I'd prefer not to if there is a fix.