To my understanding there are mortals that live in Oblivion planes. In Shivering Isles for example according to wikis, but I personaly didn't play that one.
What is their story, how they fit in the lore? I'm not talking about heroes that visit those planes, but the ones that live there. Were they created by the Princes of each of the realm they live in or all originated in Mundus? They have full life cicle there, they are born, reproduce and die there?
Depends on the Prince. Their realms, their rules. One woman in the Shivering Isles is over a thousand years old, and she was an Imperial. Some "hospitable realms" include Azura's Moonshadow, Shivering Isles and I think Sanguine may have hospitable places, since he has many pocket realms. Hircine's Hunting Grounds is always in motion, meaning you're always chasing something, or something may be chasing you providing your human. I think it may be hospitable to werebears and werewolves since it's an entire landscape of forest, savannah, tributaries and canyons.
I don't know if reproduction is possible in the Realm of Oblivion, let alone if the person died in Nirn and went there following death. But I don't know, I'm as equally interested as you are.