I agree, as far as RPG/FPS hybrids go - Mass Effect & Mass Effect 2 are pretty much top of the list for me. Oblivion was, despite it’s bloomy graphics goodness (which honestly, just have me a headache), worse than Morrowind to me. The storyline was less involving and the levelup stuff was (having decided your class & skills) not much more than a periodic “ding” to show players they are being rewarded for their persistance.
I think the best thing about Mass Effect and it’s sequel is that they don’t try to be all things to all people. You are a military guy about to become the futuristic love-child of James Bond & Rambo. You might be blasting people with your psi powers or with a BFG; but in the end you are still running through corridors vapourising anything that points so much as a sonic screwdriver your way. Instead of trying to disguise this, the game designers worked with it and made it flexible enough to give you choice but not so generic as to lose it’s edge.
The sequel did a good job of ensuring that your decisions actually had ramifications. In the first game, if you played things correctly, you could wind up with everyone a happy chappy by the end except the one token sacrifice. In this game, without preparation, the game really rips into your team (and even then - there are sacrificial choices to be made).
I think, also, one reason the concept works is the setting. Oblivion kind of sucks whilst fighting as, in a majority of cases, you end up in “click-fest melee”. Mass Effect 1 & 2 are shooting games. The weapon of choice might be mind powers, but it is still ranged.