Imagine how much Oblivion would be different if Valen escaped instead of you. You would have never became the Champion of Cyrodiil. Perhaps the MQ would be tracking down Valen Dreth and killing him for ruining your life.
To make a speculation; I doubt you would instead have to chase down Dreth, as he might be now an honored hero, for retrieving the amulet and what-not, but that's assuming he doesn't just chuck it into the lake the second he steps out the sewer. He's been imprisoned for years, he's obviously incredibly racist, and doesn't strike me as the patriotic or honorable type. I think he would probably just try and go back to Morrowind. If he choses to actually go with the MQ he would probably drop dead from heart failure when he sees the Oblivion gate.
I think your quest would be to go and pick up where Dreth left off, if he decides to go with MQ, and find the amulet at the bottom of the lake, and start after you've served your sentence if he didn't.