Keep the skinned dog out of danger

The only "leveling problem" with Oblivion is if your chosen class focusses solely on "soft skills" that are nigh useless in combat, such as Security, Speechcraft, Mercantile, etc. and has no damage dealing primary skills. If so, then you can easily end up leveling up using lockpicks, conversations, and haggling, while your combat skills stay low. Since the game adjusts the levels of your enemies according to your level (which does not necessarily reflect your strength in combat) you may end up to weak to beat them.

However, since you can adjust the difficulty settings anytime this is not really that much of a problem. Also, you can even use this mechanic to your advantage by raising only non-primary combat skills. Hence, your level (and the level of your enemies) will stay low while your strength in combat rises. This will make the game even more easy.

Having said that, I of course suggest to stop worrying about such issues and to use the "play as you like" leveling system to maximize your fun, not your stats. To this end, any moderately balanced character will do quite fine.

There are a few spell-based mods that do this.

Detect Item adds a spell that puts a particle effect on items, making them obvious on the ground or behind rocks. It's a "beta" quality release and it's been years since, so it's unlikely to get polished up, but it works. Requires OBSE v0017 or later.

Finders Keepers adds a whole lot of spells for detecting different objects by adding shaders/particle effects. It also has spells that can detect different NPC aspects, such as Vampirism, disposition, etc. Some can be used simultaneously, and some will cancel others—so you can, for example, have Detect Weapons and Detect Keys running simultaneously, but casting Detect Alignment will cancel any other Detect spell. Clearly it's not as convenient as a one-size-fits-all Detect Items spell, but this might feel more "realistic" for some players. As a bonus, though, many of the item-detection spells will reveal things inside chests as well as on the ground. Requires OBSE v0013a or later and the latest official patch.

Some of the big magic overhaul mods may also include item-detection spells, but I haven't found a comprehensive guide to their included spells quite yet.