I'm also having problems making clones, and I will need a quick reply on how I can make this program work in simple terms! (not the confusing tecnical terms that only a computer genius can understand!) My PC is also a Windows Vista 32 bit operating system!
Here's pics to show how my game is set up and the error mTES4 is giving me!
http://i78.photobucket.com/albums/j98/thedukeofspoook/mTES4errormessage.jpg?t=1291092647
http://i78.photobucket.com/albums/j98/thedukeofspoook/desktop.jpg?t=1291092740
http://i78.photobucket.com/albums/j98/thedukeofspoook/documentsmygamesoblivion.jpg?t=1291092816
http://i78.photobucket.com/albums/j98/thedukeofspoook/documentsmygamesoblivionmTES4fail.jpg?t=1291092908
http://i78.photobucket.com/albums/j98/thedukeofspoook/documentsmygamesoblivion1.jpg?t=1291093011
http://i78.photobucket.com/albums/j98/thedukeofspoook/cdrivefolderwithmyworkinginstalledgamefolder.jpg?t=1291093090
http://i78.photobucket.com/albums/j98/thedukeofspoook/cdrivefolderwithworkinginstalledgamefiles.jpg?t=1291093255
http://i78.photobucket.com/albums/j98/thedukeofspoook/cdrivefolderwithmyworkinginstalledgamefoldersomethingseemswonky.jpg?t=1291093315
I just don't know what I did wrong!

I think I epicly failed somewhere!! And yes, before I went to try cloning my copy of TES-4, I uninstalled my game and reinstalled the game with only the basic game and the GOTY stuff (1.2.0416 and Shivering Isles and KOTN) so I could have a clean slate with not one single user made mod installed! Just Plain Vanilla stuff.
I just wished the makers of this program for cloning copies of Oblivion would have instructions for those of us who use Windows Vista/Windows 7 PCs and not just Windows XP, as the instructions are geared towards XP PCs!