I joined the TES adventure with Morrowind and all 3 expansions. However, I left Oblivion before Shimering Isles, heavily disappointed with the lack of plot and immersion that Morrowind had in spades. I recently started up again after seeing that the modding community has since filled in a lot of the missing pieces of the puzzle. But one thing I haven't seen is a mod that deals with the loss of the Imperial Dynasty in a way that isn't simplistic and obtuse (I have the Emperor's clothes and NPCs call me Emperor now, har har).
By now there should be a mod that fixes this. If I were a more advanced modder and not working full time, I might take up the job myself. As it stands, all I can do is propose a new mod to the community in the hopes that someone else can take up the project.
I envision the mod being used with The Elder Council.
The mod would start sometime after the main quest is completed. An Imperial Legionnare would deliver you a letter from High Chancellor Ocato summoning you to the Imperial Palace. There he would discuss the Empire's need for a new Emperor. Under Imperial law, Ocato tells you, if a dynasty dies the Elder Council (the Emperor, when alive, the Duke of Colovia, the High Chancellor, the Counts, the head of the Imperial Legion, the ArchMage, the head of the Imperial Cult, and the leaders of all the other provinces, if the modder feels like constructing them ) must select a new Emperor from the nobility of Cyrodiil, i.e., the Counts, or, in the unlikely event that all the Counts are dead or otherwise unable to take the throne, the High Chancellor must assume the office. Ocato conveniently fails to mention that a Great Hero might also be selected. Ocato would then send you to each of the Counts in turn in order to find out where he stands on the issue. Each count would require you to do 1-3 quests before giving his opinion, all of which you dutifully return to Ocato.
At that point, you would have choices. Ocato and each of the counts would have quests for you to do (5 minimum each). You could do quests for only one party, which would get you to the end fastest, or you could play the parties off each other, doing quests for multiple parties, which would delay the endgame but increase your rewards. Finally, you return to Ocato. Ocato has devised a plan: summon the Elder Council, appoint you Elector of the Emperor (who could deny the choice of the Champion of Cyrodiil, after all?), have you appoint Ocato Emperor, and his rivals will have to sit back and take it. You agree (sincerely or not is up to you). After another 1-3 quests to prepare for the Council (during which the head of the Imperial Legion takes you aside and tells you that his armies are loyal to you and would stand by your decision no matter what, but would like to see you on the throne), the meeting is convened with all present (NPCs take the place of the ArchMage and Duke of Colovia if you aren't already). You are appointed Elector, and must choose between Ocato, the Counts, and yourself. If you choose one of the Counts, Ocato will be pissed, and different mixes of counts will be displeased (no one wants Skingrad, and everyone loves the Countess of Anvil). If you choose Ocato, all the Counts will be displeased, because there is no precedent in Law for the High Chancellor taking the Throne when nobles are available. Finally, if you choose yourself, all the counts will approve, but Ocato will be pissed. You then have the option of ordering the Legion to arrest and execute any NPCs that were opposed to your choice, or graciously letting them go. Anyone executed will be replaced by a new NPC, preferably with the mod giving you more quests to choose replacements, and preferably allowing replacement with pre-existing NPCs to give them more depth, if that doesn't create too many problems.
If there is a mod out there currently that does something similar that I missed, please point me to it!