You're crazy, Oblivion is great Just don't go leveling crazy, or it gets hard. But really, my guy is like lvl 25 or something and with some cleaver exploiting of the Chameleon spell the game is pretty easy (granted that is an exploit Nothing can see you so you can kill anything without consequence). But the game itself is a lot of fun, tons of stuff to do, tuns of different paths to take, etc. You can have fun just messing around with all the misc. stuff in the world without even doing the main quest.
Anyways, yeah, Xbox Live Arcade is basically a bunch of classic arcade (and otherwise) games, as well as some original games like Aero Wing (which was free, is it still free? I haven't looked). You can get demos for all of the arcade games too, so you can tell which ones you'd like to buy. In particular, I'd definately recommend Settlers of Catan, TMNT, Bomberman Live, Castlevania, and Prince of Persia (which is a completely remastered version of the original but in full 3d.. it looks amazingly good, though the controls can still be clunky at times). Those are some of my favorites. I've also heard really good things about the Pacman Championship Edition (one of these days I'll actually try that out )