Of course you can make a game like Oblivion
It's not just guns and enemies in FPSC, make loads of NPC characters and give them different behaviour attributes using scritps
Then go download the NPC talking / conversation scripts from here to make them interactive
http://forum.thegamecreators.com/?m=forum_view&t=65207&b=23
There is a bunch of other useful threads around the forums which lend themselves to an RPG style game
Quote: "Is it possible to make a huge world in it"
See for yourself
http://www.youtube.com/watch?v=z-_UIsGZ0IM
Quote: "If you are wanting to make a game like Morrowind you might be better off looking at Dark Basic Pro or some other enigne."
Well yes but unless you have a pretty good grasp of programming then you can add hands on DBPro volumes 1 and 2 to your order which each cost as much as the software. If you want to make a serious RPG i.e. stats heavy then be prepared for lots of coding and longer development time.