I am breaking the tie, but not by choice. I choose the second option simply because it was the closest to my opinion, and the first option was very far from it.
I have portrayed Ocato only once in my history of Rping that I remember, and that was in Blood of the Ancients. I portrayed him like I think he is.
I do not see him as an evil dictator. Nor do I see him simply as a man trying to save the Empire and find a new emperor.
Ocato of Firsthold has been with the Emperor for a long time, first seen in the opening movie of Daggerfall lighting a torch with the palm of his hand. Then, he was a man sporting a goatee (which looked totally awesome) but with poor firelight one can surmise he still could have been a pale Altmer, and the real film of the cutscene meant they couldn't exactly use an actual Altmer
Then he stood stoic and wise beside his Emperor.
In Oblivion, however, I personally saw him as a mer troubled with responsibility and stress. His Emperor and the heirs were suddenly found dead; an Emperor he served closely with for many years. He is now a man seeking to gain control over an empire crumbling without an Emperor and buckling under the throes of the Oblivion Crisis. He had the responsibilities of being the Adviser and Head Councilman for the Council, but now he was forced to also be the Empire's spokesperson in the midst of a crisis. There was likely emotional stress involved in this.
So I don't see him as a man trying to take over power and become a dictator. I see him as a man forced into the position of power, forced to be pseudo emperor. And as such, he is trying to continue the legacy his Emperor had, trying to keep the Empire he served stable. After Martin's death, he has likely given up hope of another Emperor arriving, so now has the stress of instating new government upon the Empire, while trying to keep it all intact. He does enjoy the power, I wager. he would probably take the offer to be Emperor.