Is "New and Improved" an oxymoron?

There is no rule that says advertising language must adhere to perfect logic; however, in this case you are simply being too restrictive in your definition of new.

Definitions 7-11 of new:

• coming or occurring afresh; further; additional: new gains.
• fresh or unused: to start a new sheet of paper.
• (of physical or moral qualities) different and better: The vacation made a new man of him.
• other than the former or the old: a new era; in the New world.
• being the later or latest of two or more things of the same kind: the new testament; a new edition of Shakespeare.

Among these definitions of new, there certainly seems to be a notion of something that is the next iteration, or a refurbished/remade product. So, "new and improved" could be argued to be redundant, but not an oxymoron (unless you intentionally ignore some meanings of new).

It's advertising-speak, and that means it doesn't have to mean anything literally. (When an ad announces that something is "Free!" does anyone think you don't have to pay money to get it? Dream on!) Basically, some kind of research has determined that using "New! Improved!" (and, especially, "Free!") in an ad headline, copy, or voice-over leads to some percentage of increase in sales. It's about creating an impression.

That said, something can be new without being improved. And something can be improved without being new. A thing can also be both new and improved: it can be argued that Windows 7, say, was, when it was released, both a new version of Windows and an improvement over the old version (Vista). It was still, for all intents and purposes, a new version of Windows and an improved version of Windows. Vista was a new version of Windows that many people felt was not an improvement over Windows XP. New, but not improved. Therefore, the claim "new and improved" is neither a tautology nor an oxymoron.

I wouldn't worry too much about how accurate or honest or grammatical or self-consistent advertising copy is or should be. Most people hold it to a much lower standard than most of the rest of English.

(Image comes from: http://xkcd.com/870/)