Maybe emptying the row:
SIntroSequence=bethesda softworks HD720p.bik,2k games.bik,game studios.bik,Oblivion Legal.bik
Gets rid of the intros...? :P
I also think that using ; before line makes it a comment - game ignores that line. That way you could leave the original settings commented, and copypaste new, tweaked settings under them...
Anyways, I guess the key to fixing the LOD issues lies under [LOD], if lod settings are really the cause of that blurry mess in the distance.
Maybe try altering iLODTextureSizePow2=8 and look what happens
I wish I had the game already.