Well if you use a mod to mod out the Body Type 1 and 2 nonsense you don't get achievements and what is the number 1 ed mod. Ding ding the body type 1 and 2 elimination nonsense. I don't think it should go against you for using a mod to make the game Normal

They haven't beaten it because rushing through the main story is not how you play Oblivion. Play through the main story until you get Martin Septim to the Blades Fortress then go and do side quests, Dark Brotherhood, Thieves Guild, Mages Guild, Fighters Guild and Daedric Quests then go back and finish the main storyline