Happens even when Oblivion.esm is the only thing checked. Both male and female khajiit faces appear black, but the rest of their body is colored, and their faces are colored in-game.

See this pic: http://i52.tinypic.com/358xtnn.png

How can I fix this?

I have this too sometimes, not necessarily with Khajiit, it can happen with any race. I just close the CS and open it again, and that seems to fix it.
Is it every time you do that? Cause that sounds weird to me.