Also if I buy online I've heard some versions can't be modded?
My copy is PC GOTY on disk. I've no experience with the various download versions. That said, I recall that there are or at least were a couple of download versions that could not be modded. D2D comes to mind, or was it DirectDrive? Bah! So far as I know the Steam version mods just fine. Seems like it requires extra steps when installing OBSE (which many mods require) but even that is pretty cut-and-dry so long as you follow instructions. I believe disk versions of PC GOTY (maybe in 5th Anniversary form) are still in stores.
Do yourself a favor whether you opt for disk or download and DO NOT install the game in the default Program Files location. That's asking for trouble, and easily avoided. Instead install it somewhere like C:\games or D:\games or wherever. (This assumes your OS is either Windows Vista or 7.)
-Decrepit-