Is it more like the system in oblivion or fallout or a mix of the two? I really hope it's more like the system in fallout. The topic system in oblivion didn't really allow for many choices beyond yes, no, and a general topic.

Fallout.

You could of asked this in one of the two threads that are currently on the first page.

Judging by the step up from OB to FO3, I'm hoping that it will be very flexible and immersive with a few surprises thrown in. I'm sure I read somewhere that there are around 60,000 lines of recorded dialogue.

Fallout. You choose what you want to say from a list of phrases. You're 'locked in' with that person while they speak, but you can press B to unlock and move around freely and they'll continue speaking but your speech options won't be on screen, you then press A on them again before they finish speaking and your speech options come back on screen and you resume as normal.

I mentioned this in my hands-on thread: http://www.gamesas.com/index.php?/topic/1233296-my-hands-on-impressions-of-skyrim-eurogamer-2011-thread-2/
You'll probably find some answers to a lot of other questions you might have, too.