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*You must set the following in My Documents\My Games\Oblivion\Oblivion.ini
here is another method that is more usefull because you can use every button of the joystick but it require an "emulator" to work.
* Download Joy2Key, you can easily get it by searching on google.
* in My Documents\\My Games\Oblivion\Oblivion.ini, modificate the line bUse Joystick=1 by bUse Joystick=0
* execute Joy2Key, and click on other, check the case use Axes other than X and Y and put the Treshold for input to 50%.
* now add random key on every button to see what button work with which name on the software, you can test them in notepad.
* now you just have to configure the buttons you want to use with the key you want to use.