I've run my BSAs through PUFFY and I'm too lazy to pack them back. If I copy them into my Data\Meshes folder, will Oblivion prefer them or will it still use the ones in the BSAs?

Well, for vanilla you should have the BSAs. What I do is I archive my non-optimized BSAs in a 7z archive called Vanilla BSAs and my optimized ones in one called Optimized. The BSAs should be the same name, though, for the vanilla resources. And, yes, they should be BSAs if I recall correctly.

Edit:

I hope that makes sense. I just realized it may not make too much sense to by roundabout way of saying things at times.

Better wording:

Optimize
Archive original BSAs
Take files and repack into BSAs with same name as original
Archive optimized
Use new ones

And, as I recall, this needs to be done for the vanilla ones. However, I could very well be wrong. Probably best to be on the safe side, though, and make sure it is done for the vanilla stuff.

So you're telling me BSA resources will be used even if there are actually (unpacked, PUFFIed) files with similar names inside Data\Meshes?

First of all, it's PyFFIed. Second of all, the files need to have the exact same name. Outside of the vanilla BSAs, loose files are fine. That's where Archive Invalidation comes into play. And, for that, it's best to let your mod installer manage that. To be safe, vanilla goes with BSAs and the rest are generally ok as loose files.

If you're wanting to optimize for performance you really should take the time to put the files back into a BSA. Loose files in the Meshes folder will be slower and more resource intensive than an uncompressed BSA archive.

To answer the simple question, external "meshes" will take precedence over the internal ones.
"Textures" require Archive Invalidation, and with Steam Oblivion apparently "all" files do, but that's just hearsay.

As for performance, that's a debateable question I'm not going to take part in. As usual some got better results with all unpacked while others got better with everything repackaged.. go figure. I won't.

Thank you.