Oblivion's AI being "TONED DOWN!!
"Without going into too much detail, let me say that one of the things I really wanted to do with the DB was distinguish it from Morrowind's Morag Tong, which was (obviously) very heavily based in Daedra worship. The histories of the Dark Brotherhood are pretty vague, sometimes conflicting, and I used that to my advantage with writing the questline's background fiction. So yeah, Sithis does play very heavily. But there's a lot more too it than that, and it's really the crux of the whole questline, so I can't really say more without giving away that story.
Questions about Radiant AI: Okay, here's the thing with Radiant AI... If you ask, "Can the NPCs do this? Or can they do that?" They answer is yes, with RAI, they can do a ton of stuff. But the player is unlikely to see some of it for a variety of reasons. For example, if the player hits an NPC with a spell and they get poisoned, would the NPC try to purchase a cure posion potion? Well, no, not likely, because he's going to be too busy trying to kill the player, and besides, the poison probably won't last that long.
And, in some cases, we the developers have had to consciously tone down the types of behavior they carry out. Again, why? Because sometimes, the AI is so goddamned smart and determined it screws up our quests! Seriously, sometimes it's gotten so weird it's like dealing with a holodeck that's gone sentient. Imagine playing the Sims, and your Sims have a penchant for murder and theft. So a lot of the time this stuff is funny, and amazing, and emergent, and it's awesome when it happens. Other times, it's so unexpected, it breaks stuff. Designers need a certain amount of control over the scenarios they create, and things can go haywire when NPCs have a mind of their own.
Funny example: In one Dark Brotherhood quest, you can meet up with this shady merchant who sells skooma. During testing, the NPC would be dead when the player got to him. Why? NPCs from the local skooma den were trying to get their fix, didn't have any skooma, and were killing the merchant to get it!"