Update: Bethesda has now issued an update for Oblivion Remastered that appears to restore all of the previously-removed graphical options. Original story follows below.
Original story: Over the weekend, publisher Bethesda and developer Virtuos released a patch for The Elder Scrolls IV: Oblivion Remastered on the Microsoft Store "for a few backend tweaks", but it's done a lot more damage than intended, it seems.
The update, which runs about 2GB, wasn't intended to address anything "directly impacting gameplay", according to Bethesda, but as the studio points out, the update has "affected some Microsoft Store players' UI settings for graphical settings".
More specifically, the update appears to have completely disabled upscaling functionality, and although Bethesda says any settings adjusted prior to the update "are still enabled and function normally", that doesn't seem to be the experience other players are having.

I can confirm the issue still hasn't been fixed, and that Bethesda's comments about graphical settings that were enabled prior to the update doesn't seem to apply to me. When I booted up Oblivion Remastered this morning, my FSR had been turned off and I was unable to turn it back on.
It's worth noting that this problem doesn't seem to be affecting Steam players, but since an awful lot of people are going to be checking out Oblivion Remastered on Game Pass, that's not as much of a salve as you might expect.
So, what's going on here? Well, some players are theorizing that it's possible Bethesda has pushed an update intended for Xbox consoles to the PC version of Oblivion Remastered.
Resolution scaling is locked, like it would be on console, and it's not possible to change resolution scaling options anymore, which suggests the game "wants to force you to run at 60fps like a console would", as Redditor SnakeHelah points out.
If you're wondering why a lack of resolution scaling might be a problem, scaling is the only way many people with slightly less powerful gaming PCs can play Oblivion Remastered; it greatly raises frame rates and improves performance for a lot of folks.
If that is indeed what's happening, then it's pretty much par for the course when it comes to Bethesda; this is a studio well-known for technical gaffes, and although the remaster's development was handled by Virtuos, it seems it can't escape the shadow of its publisher.
If you're not familiar with Virtuos' Oblivion remaster, it's an updated version of the 2006 RPG that was shadowdropped (i.e. launched without warning) last week, although numerous leaks had already pointed to the remaster's existence prior to its official announcement.
You can check out The Elder Scrolls IV: Oblivion Remastered right now on PC, PlayStation 5, and Xbox Series X|S, and it's also on Game Pass, although it might be worth holding off on playing that version on PC if you don't have a supremely powerful rig.