In a move that has baffled everyone, it's the original 2000's gamebryo engine handling game logic while all 3D visuals have been remade from scratch with UE5 as a graphics wrapper.
They also changed some base combat mechanics to be less floaty, added hit reactions and FX, and added sprinting.
It is a strange Frankenstein's monster that can load mods made for the original Oblivion game and runs pretty shite
hmm... lateral move imo
much better gun handling and other gameplay mechanics but the voiced protag was a mistake and like half of the new asset systems they implemented were extremely hostile to modders (we don't talk about precombines)
Modded Skyrim pure conjuration mage playthrough
I mean they did put the froggy chair in New Horizons for easy social media advertising. That is something they very much did do, albeit in a post launch patch
AFAIK, the new level up system just hands you a bunch of points you can distribute to your attributes freely. The old leveling system was one of the very few things I would mod away every time I played so I'm happy with the change.