I disagree with the "as long as their use is expressly approved by the game developer" statement; many creative works come when the developer doesn't specifically approve them. I can cite the many Super Mario World ROM hacks, for example.

For that last question, I would say "yes"; just look at all the remixes of music out there, some of which are quite good (and some of which are trash, of course).

The approval of the developer is certainly required if someone wants to change the exe or other core elements of a game. In this case, the developer provides tools to change certain aspects of the game (the "Construction Set"). The use of these tools is intended, and the developer (to my knowledge) doesn't demand any kind of approval for using the tools. Modifying the toolset itself is not allowed, of course.
Your comparison with movies and songs is an interesting one. Songs are freely cloned, modified, etc. in any imaginable way - and its legal, as long as it's clear what the origin is. To modify the original song and to distribute or sell it under its original name and author is certainly illegal. But if you do it for yourself and don't present it to anyone else, who cares. The same applies essentially to movies and books and other "intellectual property" (in a wide sense: generic drugs come to my mind, after the patent period has run out).

As dtgreene pointed out, there is a huge variety of mods for Oblivion, some of them make the game easier, some harder, some more interesting in whatever sense. The ones I mentioned in my earlier post, Oscuro's and Martigan's (and other similar mods), and the Random mod make the game harder (and more interesting for me), Nehrim is a completely new game, and certainly not easier than Oblivion. On the other hand, modifiying the leveling system of Oblivion is changing one of the core game mechanisms indeed - to the better, if done well, in my mind.

It's a matter of personal taste. How do you like the Animals (Burdon) version of "Paint It Black" (originally by the Rolling Stones)? For me both versions are very different, but equally good. The same goes for many remakes of older traditional blues songs (Clapton, Burdon, etc.). You may have a different view.

Asking for a "universal" mod is ridiculuos indeed: it's not doable, and you simply wouldn't get it. To complain that such a mod doesn't exist is worse - even worse: to complain that mods contain bugs and to expect the developers of the game (not the mod) assume responsibility for such bugs, give support and fix them (I've seen this happen).
Returning to Oblivion: Let me repeat that game engine is freely available and quite flexible. It does allow quite a high number of details to be changed, and everybody who wants a specific detail to be changed is free to do so (or to request that others do it - even works sometimes :-)). What's wrong with this?

You don't like mods? It's simple: don't use them. No-one is holding a gun to your head.

But why criticize others that do choose to use them?

Some make the game better, some worse. Some are really good, while some are horrible and will cause more problems.

The problem, of course, is to figure out which mods fit in which category.

(Also, if you ever run into a technical issue and you are using mods, *please* mention which modes you are using, as it's quite possible that the problem you're having could be caused by a mod or a mod conflict. You generally shouldn't contact GOG or Bethesda about mod-related issues.)


By the way, regarding the DLCs. To my understanding:
* Knights of the Nine can affect certain locations and possibly interfere with some quests. I would recommend leaving this disabled unless and until you actually intend to do that quest.
* The fighter and mage DLCs can interfere with each other in some way, like a certain NPC not being allowed into their home. (Also, note that said DLCs can make things a bit easier, as I believe they each add a merchant with more gold than most, and the mage one I believe gives good deals on stuff.)
* Shivering Isles is a major expansion. It's safe to install it even if you don't intend to play it (unless you're playing an old unpatched version, but the slow resource leak but has apparently been patched), but be prepared for a main quest the size of the main game's main quest, as well as a suitable amount of side quests. (Because of the level scaling, you don't need to be a high level for this expansion, unlike the Morrowind expansions.)