Don't know never played Unreal games, only one I do wanna try out is 2004 which is multiplayer oriented so I thought mods will help my single player needs.

Yes, Oscuro's Oblivion Overhaul. It was done so well, Bethesda hired the person behind it on for some of their later games (I forget in what capacity; consultant or what).

Edit: He was hired on to help with Fallout: New Vegas, so I guess it was Obsidian who hired him and not Bethesda. No matter, he still did a bang up job.

Been a while since I played Oblivion, but the problem with megamods is that they become obsolete the instant any of the single mods are updated.
As for the dialogue system I remember there was a mod by a modder named Cliffworms that made it more like the system in Daggerfall, where the NPCs' classes determined their dialogue options, but I can't recall the name of the mod.

I'd recommend starting with the following mods:

Darn UI (or something like that). The default console UI is just too annoying.

The Unofficial Patch. Fixes thousands of things.

Oscuro's Oblivion Overhaul. Makes the game scale to area, meaning some places will be more dangerous than others.
Also adds several quests, lots of new monsters and items, and adds lots of little things to most dungeons.

Thanks.

I remember reading about that one when it was relatively new but I wanted to wait until it was finished to avoid bugs and other issues. Hmm, might have to put in the backlog.

I'll have to look it up when I'm at my PC but I do have a pretty good dialouge mod. The pursuasion option still takes you to that stupid wheel system, but the wheels themselves have been deactivated. Basically you get the same four options of joke, intimidate, admire or threaten, and each has a faction and race modified chance of working. So a Wood Elf trying to threaten a Fighters Guild Orc will probably not get too far. Two of the options will lower your standing with the NPC, one by a little and one by a lot. And the other two will raise your standing, again one will raise it more than another. All four will lower it if you fail the speech check however. As you raise your speech skill you start to get hints about the NPCs specific disposition such as he doesn't like flattery or has no sense of humor. It is not a perfect system but it is way better than what we had before.

The work put in it is just insane. What's stupidly insane is how much of the things you see in the world are misplaced, floating in the air, marked invisible, placed below the ground... Just to give you an idea, back when I and a dozen other folks were helping Quarn and Kevin, we had to go and check every single object, and most of them weren't properly placed. Not sure if the devs used some automation software to generate the world, but the attention to details was non-existing.

I don't know how Skyrim is as I have not played nor modded it yet, but if it is anything like Oblivion, the level, quest and world designers at Bethesda need a big slap on the face.

... my point being, I wholeheartedly recommend this one, the game is just 'ugh' without it.
UOP together with the one for the official addons and the expansion, and the FCOM which enables several huge mods to work together without causing a mess.

I just started playing Oblivion a couple of weeks ago. I am really enjoying it. Why? Because I pretty much just love video games.

The only major problem I have with it is the shitty leveling system. The persuasion wheel is pretty dumb, but not that big of a deal.

If I had played it a year ago, I probably would not have liked it, but since then I have decided to stop being a cynical asshole, and just enjoy what I enjoy without trying to analyze it. And the fact is, despite its flaws, I am having a lot of fun exploring Oblivion. I don't give a shit about linear design or lack of immersion as long as I am having fun.

/my thoughts

You absolutely should. Aside from the graphics, it bears little resemblance to Oblivion. The opening is somewhat long, and has some interesting sequences that immediately made the game feel different. The world as a whole is darker, the leveling system has been rebuilt and I could be wrong, but seems to have some influence from the Gothic games. Monsters in the wilderness will eat you for breakfast, so it's important to be careful and stick to the roads. The game also doesn't hold your hand so much, you have to figure out quite a bit on your own. Basically, if Oblivion didn't exist, and Nehrim did, I' be fine with it, haha.

That being said, it isn't perfect. I had some glitchy moments, just like Oblivion. That being said, it is as close to retail AAA quality as I've seen from a total conversion. I believe the mod team are currently working on a sequel using the Skyrim engine.

Skyrim is much better than Oblivion, from my perspective. It still has the issues with some pretty silly guild quest arcs, but it is nowhere near as glitchy and broken as Oblivion was on release. I played this game to death, and the only mods I used were cosmetic (new armor textures, a body/hair mod, etc) and one to make dragons tougher in the late game (which I ended up removing because the dragon battles became too tedious for me).

Edit:
Oh, wait. I did install one mod that would unequip arrows/bolts when you unequipped a bow, and vice versa. This could be seen as a fix rather than just a cosmetic change, even though it didn't change anything else about ranged weapons.

As I often say to people, my 3 reasons to love Morrowind : the books, Seyda Neen quests, and the whole setting (racism and slavery issues, plots, background ...)
And the three reason to prefer Morrowind to Oblivion : factions, levelling, and the books again (and lore , trivia...)

But then again modding is really welcome.

The main issue I have with Morrowind, is that Seyda Neen is far better 'quests-crafted' (in regard to its size) than most of other places. Call it a mild disappointment.

Edit : so to answer your question, oblivion is so anti immersive because they dumped the lore, the trivia, the dialogues, the decisionnal tree AND they relied on bloom, blur, HDR, cheap cloned caves, clichés, not so good gimmicks to broaden the fanbase to console players. That's my opinion*.

You know what you do if you really, really want to be a professional thief? You join the thieve's guild and be a professional thief. The beauty of TES series is that they allow you to roleplay everything and anything you want to, no other RPG I have ever seen does it to such an extent. It's oh so easy to piss on the game, but there's none other like it - so I suppose I'll just suggest you to go and play other RPGs, but you're missing the 'point' by a long shot.

It is impossible to make the world react to your decisions properly, because every reaction would go against someone's image of what he is playing - and implementing all the reactions possible is just not doable. TES series are fun as long as you accept a simple fact - you are not playing someone else's story, you are making your own. When you do that, they become a whole lot more fun. You can be a herbalist who never kills anyone, but if you pick this path, you can't complain that the game allows you to kill almost everyone. You can be a pure thief who never betrays his guild, but you can't then complain when you decide to do so.

Also yes, if you are witnessed doing a crime against your guild, you are booted out. It's just when nobody from the thieve's guild knows you're in the dark brotherhood, why on earth would they turn on you?

And to answer another question of yours, yes, Morrowind does force guild exclusivity - you can only join one house, which makes sense since they're completely contradictory and you have to represent the houses regardless of whether you want to or not, and as for guild quests, you can join all of them, but later quests make it impossible to fulfill all the questlines.

As for anti-immersive - it's not the game which makes immersion, it just hands you a lot of tools to make it immersive yourself.

Yes. Definitely. They even have a professional medieval band performing in the game, as Gothic 1 had. (In Nehrim it's Schandmaul)

As to the glitchyness I think there are enough patches and to remove all serious bugs. Plus, when you are done with Nehrim, there are even some good mods-for-the-mod that extend the world even further.

Essentially the problem is that these sorts of games work on the premise of the illusion of player agency rather than actual player agency. If you go along with it, that can be a fun experience, but you need to go in with the right expectations and mindset.

The problems come out of the woodworks when you expect real player agency. The game works on the premise of scripting the reactions of the world. If the player does X, the world reacts with Y. This is simple enough with a lesser scope (to use your example, joining a guild) but starts to break down when you start doing combinations of actions not explicitly considered by the developers (ie, joining every guild). This can also work the other way around, where action X does not cause reaction Y even though there is a logical correlation (a problem going back to the early days of point-and-click adventure games). All this can quickly break immersion when the world does not react to your choices and the illusion of player agency is dispelled.

Honestly, if you want a world that reacts organically to your actions... play a pen and paper table-top RPG. I don't expect to see anything that gives true player agency in the RPG arena any time soon. You'd need to move away from a scripted cause-and-effect style system and towards a more organic AI system, which is a huge paradigm shift I just don't see the RPG genre making (not to mention technically complex).