I just thought of an interesting idea for a leveling mod that would encourage exploration of the world and fix the worst problems with the current system. In this mod:

* Your skills improve by use as normal, but you never gain any level ups as a result of this.
* The first time you open a boss chest in a generic dungeon, you get a +5 bonus to a stat, depending on which type of boss chest it is. (For example, a boss chest in a Conjurer or Necromancer dungeon would typically give you +5 to Intelligence or Willpower.)
* If that stat is Endurance, your Health is recalculated.
* If the stat in question is maxed, all extra points go toward Luck. If Luck is maxed, you get to choose which stat gets increased. If all stats are maxed out, the extra points are wasted, but still count toward level advancement.
* Every 2 such chests opened will raise your level by 1, and your HP will be recalculated accordingly.
* Opening the same chest more than once, on separate trips to the dungeon, will not give you the bonus a second time; you need to find new boss chests to get your stats and level to grow further.

Does this sound like an interesting idea for a leveling mod? (Note that, if this mod idea is actually implemented, the numbers might be subject to tweaking, and might even be an option to pick when installing the mod.)

It's an interesting idea to link level-ups with in-game achievements - not necessarily with finding "boss chests", as far as I'm concerned (this is something for "loot-oriented" players, and I am not one of them :-)). I'd rather see something role-dependant. You play a thief, say, so you would replace the "boss chest" with the "boss lock", etc.
That said, my major concern with the Oblivion levelling system is not so much the criteria for levelling up but the consequences of levelling up.

Actually, no, it would not. Since you do level up with this mod active, just in a different way, you can still do those quests; you just need to explore some dungeons first.

(Also, there's actually one Daedric quest that can be completed at level 1; speedrunners take advantage of this to avoid ever having to gain a level.)