I'm not too tech savvy, but I played Morrowind on the PC years ago at a friends house, and I noticed that the Construction Set came with the game on a separate disc that had to be installed.
Well, I just bought OB for the PC, GOTY edition, and it has 2 disc, one with OB on it, and one with SI/NoTN on it. But no construction set. Am I missing something? I've looked through the installed files folders and there is no construction set. Searched my comp, nothing.
Where is the construction set?

Oblivion doesn't come with the CS.

Download it here: http://elderscrolls.com/downloads/updates_utilities.htm

Which one do I download? Installer 7 megs, or patch 3.2 megs?

I'm guessing you download both, run the installer first and then the patch.