Make sure you have OBSE (v18) installed first. You probably do, but just checking.
And yes, create the folder if necessary. And future OBSE DLLs always go there.
As for "src", you will (chances are) never need that, wherever it comes from, now or ever.
edit: Oh, and *always* use the obse_loader.exe executable instead of Oblivion.exe or OblivionLauncher.exe .