I think Oblivion alone is worth 20 bucks more than you will pay for it, because of the sheer scope and amount of content. With that in mind, the expansions would essentially be free!
Alas, I have not experienced NWN2, so I can not offer an opinion on which is the better of the two.
I have completed the vanilla Oblivion, and I definitely will be purchasing the expansions after the mayhem of the current season of phenomenal new games.
Just my 2 cents.

The game mechanics are friendlier in Oblivion compared to NWN2.

I can't compare the two, but will vouch for Oblivion's awesom-issitude. I finished both the main campaign and Shivering Isles and still feel like I barely scratched the surface of what the game had to offer.

I liked Morrowind III and Baldurs Gate II as well as Icewind Dale II (which I'm about to finish). I liked having a party in the Bioware games and the tactical gameplay that having a party entailed. I liked the immersion of the Morrowind game although I found the perpetual foggy look distracting. I guess I'm looking for advice like if there are bugs that take away the enjoyment, or if they become too repetitive after a few hours of gameplay, or if there are gameplay mechanics that are bothersome, or other things that make the game less fun that a fan of either type of play might expect.

Hmm. If the fogginess is draw distance due to hardware limitations, you'll be annoyed with Oblivion as well. Otherwise, it sounds like you would enjoy either.

NWN2 did, but I think that's fixed. Make sure to patch.

they really f*cked up the camera system in the latest NWN2 patch. I'm playing both Oblivion and NWN2, I think both have enough faults that I'm not a huge fan. Last good RPG i played was KOTOR.

Oblivion is probably the better designed game, technically and creatively, but it's also huge and lacks direction. At least NWN2 tells a pretty cohesive story that unfolds and you don't forget half of it while you wander around doing side quests.

I've just started really getting into NWN2 (ie not just creating new characters, abandoning them and starting over and over and over) after buying it last year and I'm enjoying it. There is something about the Elder Scrolls games that has just failed to grab me in anyway. I had a great time with both Morrowind and Oblivion for a couple hours and then my interest wanes pretty quickly.

I think it's better now, but I didn't play all that extensively with the older versions and I never really liked it in NWN1. You have 2 options now, a World of Warcraft-like over the shoulder camera and an RTS (or perhaps Baldur's Gate) style top down camera. Each mode has a ton of toggles and sliders you can adjust to your liking so there should be something in there for most everybody.

The biggest change in the patch though, for me and my ancient computer anyway, is the performance. It is much improved. I can actually turn up details a little bit and the game still runs much better than it used to. I think the inventory system has been tweaked too, it seems a little different and more responsive. The fact that so much has changed and that performance has been so drastically improved kind of makes me wonder if the game (like KOTOR2) just wasn't ready to be released when it was.

The expansion looks promising and is coming out next week, I think.

Oblivion grabbed me in the first hour with the way they handled the introduction to the world and tutorial. I remember some complaints only that the gameplay wasn't hardcore RPG style, but it never bothered me. Mostly because I don't know what hardcore RPG gameplay involves.

Heh, I came here to post exactly that. I decided to pick up Oblivion GotY and I saw the price at GoGamer which just made the decision easier. NWN2 still sounds interesting, maybe I'll get it someday packaged with an expansion pack or two.