What's the deal with the patched .esp? Last I knew (and it's been a couple years since I last played Oblivion), you can't modify an .esp with another .esp. That would make one .esp master of another. Only Morrowind did that. As far as I knew, in the old days of Oblivion an .esp can only modify an .esm. Is this some new technique?
The Bashed Patch doesn't PATCH mods
per se... rather, it includes changes made by different mods to the same record so that, rather than one overwriting the other, all the changes are preserved. So, instead of patching an .esp, it kind of patches several .esps
together. It does all sorts of other stuff too, but that's what's relevant to your question. I think.