So I've played a lot of Oblivion, but what is "broken" about the leveling? I never had a problem with it personally.
I think the biggest complaint comes from the type of gamer who thinks that they should be rewarded for leveling, or in other words, that the game should be easier when you take the time to level. This is not necessarily true in Oblivion since the monsters scale up with you. People complained about the same thing in FF8 IIRC. To each their own I guess.
My (minor) complaint stems from the fact that I'm a perfectionist, and if you know how the leveling system works, in order to maximize your stats you have to level certain non-primary skills a certain amount in order to get the max bonuses at level up. I forget what the formula was but I think to get the option to increase a stat by +5, you had to level up a skill in that stat's "family" by 10 before leveling up. Which kinda made things a hassle and detracted from the gameplay experience.
If you were ignorant of stat bonus system and you picked primary skills that level up really fast (like alchemy), you can really nerf your character in end-game, which is kind of annoying.
Also, it was kind of counter-intuitive that in order to play the game efficiently, you had to pick primary skills that leveled up really slow and only leveled up when you wanted them to, for the aforementioned reasons. I remember that my power characters always had acrobatics as a primary skill. When I was ready to level up, I would just jump up and down in a corner until I gained enough points to level. Thus, a lot of my custom classes looked like acrobatic, charismatic, merchants or some crap like that, when in fact they had 100s in all the major combat categories.
All in all, vanilla Oblivion had some pretty stupid gameplay mechanics, but even vanilla Oblivion was a pretty good game. Even though I had it on PC and I knew about the mods and what they did to make the game better, I never bothered to try them out because I couldn't be bothered.