After reading the posts I could find regarding the topic, I need to confirm and/or clarify the correct procedure for creating a mod that adds to DLC content. In my particular case, I'm expanding the Vile Lair (Deepscorn Hollow) by both modifying the existing layout and adding additional rooms/content. Now, as I understand it, the process is thus:

• Open WryeBash and load plugins
  
• Right-click on "DLCVileLair.esp" and choose "Esmify Self"
  
• Open the CS and load both "Oblivion.esm" and "DLCVileLair.esp"
  
• Make my changes as needed, then save as new ESP file with whatever name
  
• In WryeBash again, right-click on "DLCVileLair.esp" and this time choose "Espify Self"
  
• Launch game (loading new ESP of course) and check changes and/or play game

Does this sound correct? And do I need to close WryeBash after step #2 or can I leave it open in the background?

Also, I'd welcome any advice or "gotchas" that show up when doing this sort of thing. In the past I've had terrible luck trying to make a mod for DLC content.

Thanks in advance!

An alternative is to use http://www.tesnexus.com/downloads/file.php?id=36370, which lets you have an esp as a master w/o issues. It has lots of other useful features as well of course.

I haven't done anything with the DLCs, but I have done esp-mastered plugins and you have the basic process correct. One minor convenience you missed is that, once you've created your new file, you can right-click it in Bash and select "esmify/espify masters", so you don't need to be jumping around in your load order between the DLC and your mod. (Even handier if you're mastering off multiple esps, of course, but it sounds like you're only going to be dealing with one in this case.)

And, no, you do not need to close Wrye Bash at any point in this process.