This applies to Morroblivion. There is probably a similar trick available for Skywind though, but I dunno what it is.
Step 1: Install DARNified UI
Step 2: Edit your files:
Go to the Oblivion\Data\Menus\Dialog\ folder and then open dialog_menu.xml in a text editor (Notepad works fine, I am using the free software Notepad++ in the screen below):
Find the line that says "<_number_of_lines>" and change the value from 5 (or 8) to something larger. 16 looks nice and doesn't break the scrollbar formatting. You can go higher (25 reaches about the top of my screen), but the scrollbar looks ugly.
Here is with 16 lines. Nice! Cannot believe I didn't think of this sooner.
I also strongly recommend installing Protocolled Dialogs if you like what it has to offer.