I uninstalled everything I could think of that would interfere with the IC region - got rid of Better Cities' Imperial City, as well as UL Imperial Isle. Rebuilt my bash patch, reran TES4LOD to regenerate DistantLOD.
It seems there as still several issues to be ironed out. Happy Beta!
http://www5.picturepush.com/photo/a/3780278/img/Oblivion/Oblivion-2010-07-11-01-14-11-90.jpg
http://www1.picturepush.com/photo/a/3780279/img/Oblivion/Oblivion-2010-07-11-09-51-37-86.jpg
http://www3.picturepush.com/photo/a/3780281/img/Oblivion/Oblivion-2010-07-11-09-57-40-84.jpg
http://www4.picturepush.com/photo/a/3780282/img/Oblivion/Oblivion-2010-07-11-10-00-17-80.jpg
http://www5.picturepush.com/photo/a/3780283/img/Oblivion/Oblivion-2010-07-11-10-01-16-40.jpg
http://www1.picturepush.com/photo/a/3780284/img/Oblivion/Oblivion-2010-07-11-10-04-32-68.jpg
http://www3.picturepush.com/photo/a/3780286/img/Oblivion/Oblivion-2010-07-11-10-05-13-59.jpg
Best of luck! Keep up the good work.
(still hoping a non-floating AU will be an option in the future....(grin) )