A small question (a bit out of discution) : How to convert ESM to ESP? TESVSnip doesn't seems to do the job
Wrye Bash will do this task. It has esmify and espify commands on the menu you get when you rightclick on a mod.
For this workaround to work, it has to be an .esm. If the actors are loaded from an .esp, it won't work even if you have the exported meshes. At least, I haven't gotten it to work.
Are you sure? Does this mean that they have fixed the Oblivion bug where if you have one .esm editing the main .esm such as Skyrim.esm, you get horrendous bugs like the ground disappears below you and all the actors and loose objects fall into the underworld and then splat when they land. In a milder version of the bug, all the non-persistent objects in Tamriel disappear and the world is rather empty. You mostly just see actors walking around on a moonscape dotted with doors. This is why Oblivion modders never have another .esm edit Oblivion.esm, that is work for an .esp.
I followed most of your advice except for the part about leaving the file as an .esm. When I play-tested on my machine, the two-colored skin problem with my NPCs was fixed. Are you saying that it is only fixed on my machine, and when I upload the mod it will not be fixed on other people's machines even if I package the proper files?