Here are a set of question about the possibility of beards in Character creation in Oblivion.
What in Player or NPC creation controls hairstyles?
Can this control be duplicated so that the game gives the modder or the player a choice of two hairstyles at the same time?
i.e. hairstyle one and hairstyle two.
Can the interface of the NPC and Player creation have a second option for hair at the same time as the original?
Can second hairstyle be used as a facial hair slot?
If there was a third slot could that be used for something like war paint?
I played with the CS to see what I could do with meshes from beard mods.
Instead of making a new race for beards I made a new hairstyle for males only that could be added to any race.
I made an NPC and chose the new hair style which was just a beard and the result was a male face with a beard as a hairstyle but with no hair.
So it is possible for NPCs to have beards as a hair style but since the beard and hair are not merged the player can only have facial hair or regular hair styles.
Ideally it would be better if in the CS the beards and hair were some how merged or there was a mod that gave second hair choice in the interface somehow.
Going into a 3d editor to put together both vanilla hair and facial hair then going into the CS to create many combos of bearded vanilla hair would be very tedious and then there are the various modded hair to consider.
I think it comes down to scripting and an interface edit to add more options to both NPC and Player creation.
If there are mods that can give us a total conversion and a alternate start then this should be possible.