We always eat at Tait's in Oscoda. Good steaks and fish. Good bar. Wiltse's is also very good, especially for breakfast. AuSable Inn, as mentioned is also a good place. Just be careful because if the air conditioning is cranked up, some tables can be really cold. If you're there during the marathon, the Inn is a great place to watch the watermelon race. The locals will explain. It's a riot!
+1 for both Tait's and Wiltse's. We ate at Tait's this past New Year's Eve and were pretty happy. Salad actually made from non-iceberg greens...big plus up north. Wiltse's has some good house brewed beers, decent bar-type food.
We like Mama's Place for breakfast...linoleum floors, fake wood, waitress calls you "hon" kind of place. Not gourmet but good for the basics.
If you're there in the summer, the Oscoda Farmer's Market is on Wednesdays and is totally worth a visit.