From Nexus Wiki
This tutorial will demonstrate how to create a shiny and reflective effect for your weapons and armor.
It's a matter of making the armor (or weapon or other item) like that of glass. The effect is controlled by settings inside NifSkope (tested on NifSkope 0.9.8 thru 1.0.6). You'll then need to tweak the diffuse texture (a.k.a. Color Map / Texture), normal map and it's alpha channel to make it look good. Generally, when you just change the NIF properties, you don't get the best effect. Learning the basic steps is easy but it can be difficult to master the effect. It's a game of tweaking, balancing, and re-tweaking that is more of an art than science to get it to look right.
Even when you get the armor to look good, you'll then need to tweak it even further to make it look good in daylight (not too bright), inside buildings and at night (so it doesn't look like unrealistic shiny plastic).
If designing the model, it is best to keep in mind that the shiny metal should separate objects (NiTriStrips/Shapes) from the non-shiny pieces. This allows for separate material properties and is much easier to control for non-shiny pieces.
- Open the NIF file in NIFSkope.
- Change the existing value for NiMaterialProperty to EnvMap2.
- Select the NiMaterialProperty and ensure Ambient and Diffuse Color are White (#FFFFFF), Specular and Emissive Color are Black (#000000) (Emissive is white if you plan to use the glowmap)
- Change the Texture property from APPLY_MODULATE to APPLY_HILIGHT
- Adjust the diffuse texture according to the color chart below:
- Make sure the Normal Map does not have deep grooves.
- Adjust the Normal Map Alpha Channel: White = Uber-Reflective, Black = No Reflection.
Use this chart as a guideline for the color of your diffuse texture.
- Gray/Silver - Darken and smooth a lot.
- Red, Blue, Green, Brown - Darken and smooth a little.
- Gold - Leave alone.
- Most other colors - Only make minor changes.
If the color of your original texture needs to be silver, the chart above states that you will need to darken this color quite a bit and smooth it out to get a nice effect when the Reflection Map is applied but it will look odd in NifSkope because it will show the dark and non-reflective texture. You can only see what it looks like inside the game.
If the color of your original texture is gold, the chart states that you will not likely need to make any color changes to accommodate the use of the Reflection Map.
It's also important to note that the reflection map this technique uses was changed between Oblivion 1.1 and 1.2 patches. So if you tweak your armor for version 1.2, it will look different on machines without the patch or running version 1.1.
The texture file that controls the look of the reflection map is Textures\effects\windowenvironmentmap01.dds. It is recommended that you do not change this file since it controls ALL environment reflections. If you'd like to create an alternative, I'd recommend doing it as a standalone mod that can be used as a recommendation to other mods that use the reflection technique rather than a requirement.
If the video option in Oblivion called "Window Reflections" is turned off, the armor will look completely different and usually not very attractive.
If you use this technique, be sure to credit Vagabond Angel for the original technique and then Jerros for the additional information.
Source: LHammonds Oblivion Mods Site