I love the imperial city, I am wondering if there are any mods that make it more interactive? Such as more quests, black hourse courier jobs, more arena content, more people, etc.

Bananasplit's Better Cities. Does many thing to the IC, definitely suggest that pal.

The Elder Council (Dragon Captions version is on the nexus)
Lets you join the legion, and rise through the ranks. Huge new areas within the palace.

Also TEC: Temple of the One

I think that Kragenir's Death Quest adds some quests to the IC, of course you have to leave the city to do most of them but at least it makes me feel like i need to come to the city to do things. Also Enhanced Economy makes me check out a lot of stores not only in the IC but also various towns to make sure im getting the best price.

You might want to try Redbag's Imperial City Pack http://www.tesnexus.com/downloads/file.php?id=22726
Never tried it myself because I use the imperial city from Better Cities but it's supposed to be really good.