How do you update OOO 1.33 Complete to 1.34 Beta? Do you just extract the files from the OOO 1.34 Beta Folder to Oblivion/Data? Or do you use Oblivion Mod Manager and create a omod?

You can do it either way. I'd recommend using either OBMM or BAIN when installing OOO, though - for one thing it will switch to a bsa in the next release so you'll need to remove all the loose resources when updating.