Hello again!
ICS still lives. I've been working on adding two new suburbs: "Old Bridge" to the north of IC and "Hrol's Terraces" which connect the Old Bridge to the Hylon Fountain. The exteriors are more or less complete, and I kind of started working the interiors, but it's going slow. Here are some http://olivia.aob.rs/oblivion/oblivion-screenshots.html of the new settlements. Hope you like them.

The things I said I'd be doing - quests and dialogs, unique NPCs... well, at the moment, that bores me and I don't even have a guesstimate at when I'll start, let alone finish that aspect of the mod. The way things are going, I'll bring the new areas to the same state of completion in which I released the first suburbs, and then see what I'll do next.
When done, the new stuff will double the area covered by the mod and the number of houses/NPCs. It will cover, I'd say, a fifth of the Imperial Island. So yeah - I might finish it whole in a decade or two.

Another thing I've been thinking about is compatibility. Jokes aside, I do fully intend to populate the entire island some day, so ICS will continue to conflict with all other mods that touch the same areas. Even if I make the current version compatible with these other mods, chances are that the future versions will break the compatibility again, and in ways that can't really be remedied. So if you've been hoping for compatibility patches for ICS, don't hold your breath.