Oblivion Remastered modder has already fixed its awful levelled loot system, after very reasonably blacking out in an 'incomprehensible fury'

Unfucking the leveled lists and automatic leveling or everything in general was one of the first things modders did back when the original Oblivion released as well. Appropriately nostalgic perhaps that it still needs to be done in the remaster too.

Unfucking a Bethesda game with day-one mods is a time-honored tradition. Toddition.
- Todd: "it just works."
  Modder: "yeah, you're welcome."
Oh look, a common cutpurse in full Daedric armor!
- That Daedra shouldn’t have been walking alone at night.
Was anyone expecting Bethesda to do any more than upscaling some textures?
This is a cash grab, plain and simple. Zero effort
- They literally did more than just upscale some textures.

Nothing worse in an RPG than building yourself up into an unstoppable beast only for every stick brandishing bandit and feral dog to be juiced up to the eyeballs when you fight them, taking your god strength blows to the face with not even a flinch.

When you have a leveling system and everything in the world levels up along side you there may as well not be a leveling system at all. Devs do it when they want to say they have a leveling system but are too lazy to make it work correctly.
- It makes sense for things to level in an open world game where someone could encounter an area at level 1 or 10. In order to provide a reasonable challenge for the player coming to that area. What oblivion did wrong is it was far too global and there weren't sensible caps and floors on areas.
Morrowind already had a great design for this; many enemy spawns scale with your level, but they do it by adjusting which area-appropriate enemies have a chance of spawning, and it only makes a difference to a point. Like if you go to daedric ruins in the early game they're going to be populated with scamps which are the weakest daedra, but those are still strong enough to steamroll you. If you run into a cliffracer in the lategame it will probably be the plague-enhanced stronger variant, but you will still be able to oneshot it. This system increases the number of circumstances where you're going to run into challenging fights you have a chance of winning, in a way that doesn't do much to nullify your power progression or break immersion.
They should have just done the same thing in Oblivion but they had some procedural obsessed design philosophy and wanted to avoid manual level design work I guess.

Oblivion is the go-to example of how not to do level scaling. It's impressive how badly they fucked it up. Like, they managed to make exploring pointless and unexciting.

You find a tomb, but you know that whatever's inside will be "level appropriate". If you're low level it'll be steel weapons, and if you're high level it'll be daedric. There's not really any point in going in at low level. Might as well level up some other way and come back when the loot will be good.

On top of that, the gameplay is so bland and unresponsive that you can't really punch above your weight class. The game is very much a levels game. It's not like Dark Souls where someone can get really good and beat the whole thing while naked (and in the game, too). There's a lot of "well, this guard is level 30 and you're 10, so no matter how many times you hit him with your hammer he's not going to flinch." Knowing you're always going to get kind of bland treasure wouldn't be so bad if the act of getting it was fun. Like, sometimes a tomb or whatever in Elden Ring will have crap loot, but it's still a solid core gameplay.

Morrowind had a lot of these problems, but it was also kind of wacky and heartfelt.

Morrowind also had a lot of static loot, though, and humanoid enemies had static levels. Some items, most notably Daedric armor, also never appeared in Morrowind's levelled lists, so they could only be found at predetermined points. Exploring in Morrowind could get you some really neat stuff even at low levels.

Didn't realize they didn't fix this. I knew there was a catch to this remaster...

They didn't fix shit that the unofficial patch fixed years ago. Like actual broken things just stayed broken... I did the main story mission in Kvatch and the NPC you followed into battle after you clear the oblivion gate got stuck in a courtyard. I looked up the issue and apparently it is a bug from the original game that the unofficial patch fixed... They know fixes exist, they just spent literally 0 time implementing them knowing "we" will do it for free...
- I was told jank was left in specifically because that's a huge part of Oblivion in the first place.
  Part of me appreciates it. Also it's just using the same code from the original game, so I guess they wouldn't want to fuck with it too much. Duct tape and voodoo, after all.
- Haha that happened to me. Maybe we'll get a patch for some of the stuff that actually breaks the game. I love some of the quirks they left in though, like the voice acting screwups.
Yeah, I'm glad I requested the urge to buy it when it came out.
I figured, like you said, there'd be a catch and then I saw the story of files being the exact same as the original and thought I bet a ton of stuff I hated about the original was still there, better wait for a sale.
- I"m the opposite. I bought it immediately and I've been loving it! Wouldn't have even noticed the leveled loot if someone hadn't pointed it out lol. It just sucks that they left that in after fixing the character leveling system.

I am largely happy with how faithful the remaster is, warts and all, but this is something they should've included as an optional checkbox in the settings.

I don't know why people expected anything different, this is not a bug to be fixed is a awful decision they made for the original and had a huge chance of staying in the game, it's a remaster after all.

So Oscuro's Oblivion Overhaul 2.0 essentially?

Throw in some MMM and Deadly Reflex and we're cooking with gas!