I wish I could see what your exact complaint is about the image. I'm missing something obviously.
I know that Oblivion has long had a problem with layered transparencies. Stand under a waterfall and watch your hair disappear.
Yeah, it's really only obvious what I'm talking about with the hair layering issue if you're able to turn the character from side to side in-game. But the screenshot I link to above should give you some idea of what's going on. Basically there's a transparent box around each tuft of hair that will make the underlying hair, as well as some other features (like the headband), disappear at certain angles.
I think I have an idea of what I did wrong. I restored any NIF in the BSAs or /Data directory that had a corresponding EGM file. But I didn't stop to consider that a lot of the files in the /Data folder (which, for example, were created by the Unofficial Patches) are still using the
original EGM file in the BSA. For example, there may be a khajiithair.nif and khajiithair.egm file in the BSA, but only a khajiithair.nif in the /Data folder. In that case the BSA version of khajiithair.nif would not have been PyFFI'd, but the /Data version would have been. If I restore ALL of the hair, hood, helm, teeth, tongue, etc. files in the /Data directory, that should fix the issue...
EDIT: Yep, that's exactly what the problem is--problem fixed. NIFtoaster is smart enough to skip NIF files with an associated EGM file, which should be fine whenever it's processing one of Bethesda's BSA files. However, that doesn't work in the Data folder because oftentimes a new mesh in Data will be using a Bethesda EGM file buried in the BSA. It's necessary therefore to manually undo optimization of any helm/hair/hood/etc. NIF files in the Data folder, if Data doesn't contain a paired EGM file.