PhoenixAmon: Known, and I posted it on a couple of places and PM'ed some folks too I think. Anyway, credit
now given! And, I think that you're right about PirateX not knowing it was impossible. However, remember too that at the time we were figuring out mod isolation, we didn't have the tools to easily try the bait and switch trick. (I.e., I kind of suspect that he used Bash to do the bait and switch trick -- so I get partial credit for it anyway

)
By signalling I mean something mod that is
specifically designed for signaling between mods -- i.e., that would otherwise not be necesssary. For LCV, one signal was a global that LCV watched in dialog, another was an "OffSchedule" token that an NPC might have. If an NPC has the token, LCV doesn't apply schedules to them. Neither of those was something that LCV needed for itself, they were both there purely to support integration with other mods.
I think what you describe with thievery or Retro Crafting is more of a resource mod -- i.e., it provides resources, which another mod can also use. (But I'm not familiar with the mod, so I could be wrong.)
But I think that I'm quibling over details here...
dev_akm: Well it's not necessary to hex edit anything anymore. Suppose I want to glue mods Alpha.esp and Beta.esp together...
1) Use Bash's "Copy to esm" command on both Alpha.esp and Beta.esp. This creates esm copies of both mods, while leaving the esp originals intact.
2) Build glue mod Gamma.esp with Oblivion.esm, Alpha.esm and Beta.esm as masters.
3) When ready to playtest Gamma.esp, use Bash's "Espify Masters" command on it.
4) After playtesting, if you want to re-edit Gamma.esp, use the "Esmify Masters" command on it.
Then repeat 3 and 4 as necessary.
A possible improvement would be to have a Bash command, which than rather applying "Espify Masters" directly to Gamma.esp, first copies Gamma.esp to "Gamma X.esp" and then espifies "Gamma X.esp". That would allow modders to skip step 4. The only problem with this would be with mods with BSAs and/or voice files, which are linked to the exact name of the mod. (There are ways around this, but it's a complication.)
Longevity Hmm... I'm not sure that I agree with your point. The esm/esp split is more imporant for allowing variations of a mod (no small benefit), than it is for supporting upgrades. I think that if someone came in and did a substantial upgrade, then it would probably be necessary (or at least strongly desirable) to update the esm, rather than just release a patch. My MW experience (updating LGNPC Seyda Neen, NOM and LCV) all supports that -- for each of those, changes were pervasive enough that updating the original mod was more desirable than releasing a patch.
Maintenance, Size, Teams All good points. No counterarguments there.
Summary We're certainly expert heavy on this topic! And in truth, I haven't done that much modding for Oblivion, so my expertise is less than others. I still think that patch and glue are easy enough to do for esp mods, and I would strongly lean to doing that. However, a lot good points about moving to resource esms have been made.