You'll like the http://www.imperial-library.info/obscure_text/cosmology.shtml. It puts everything in the universe in it's place. Until you've read that, suffice to say http://www.imperial-library.info/mwbooks/lunar_lorkhan.shtml aren't Oblivion.
There is no explanation for the change in light, but I would speculate that the appearance of "light" is perception of magicka. The less there is, the more it shifts from white to blue to red to black.
The duality between Oblivion and Aetherius seems to lie in the creation and consumption of potential. In a way you can consider Magicka crystallized possibility, when released it makes something that was previously impossible, possible. The counter part to this would be space for possibility to become. If everything already is, then there is no more room for more. As an anology, it's easier to create water in the desert then in the ocean.
While Mundus is made of mixed amounts of magic and void from Lorkhan and the Aedra, it still has more far more potential then Oblivion. So the red sky you see is the magicka leaking out into Oblivion.
Alternatively, Kynareth is bleeding.