I very strongly disliked the essential NPCs of Oblivion. I also am not in favor of flags. I don't want to come across some NPC early in the game and see they are flagged, but not currently have any quests relating to them. That'd be a bit of a spoiler.
Besides, assuming the NPCs don't go around killing each other, the only character in the game who would be killing and essential NPCs is the player. And that's entirely preventable, if you are wanting to beat the MQ or any quests, don't go on a killing rampage prior to doing so
I know for myself I did kill one or two ppl in Morrowind and had to reload as I had cut the thread or w.e lol. But it was great for replaying the game with new characters who didn't need so-and-so alive because I had no intention of doing the MQ with this particular character.