(I'll answer the Exult question quickly anyway... If I'm actually wanting to play Ultima 7 properly, I use DOSBox. A lot of things in Exult just aren't the same, most noticeably combat. When making my remake, Exult is open all the time, as it lets me look around and see what there is to see)
As for the Ophidian ruins question, I'll be making whatever models I need for it myself (as I've had to do a lot so far). They may not be perfect, but they should be around the same level of quality as the original Oblivion models in order for them to fit in with the rest of the game.
Putting it in a first person 3d engine is about as big a liberty as you can take. It logically follows that by committing to that decision, you will be open to other decisions that aid in translating the game to that new engine. Your decision though
There are definately some decisions that I am making to convert it to 3D. Some houses are rotated different directions, as the doors being to the south and east on every house was a necessity in the U7 engine. It looks silly to have that in an actual 3D town. Sleeping Bull tower I put on a hill, since it creates an awesome "moment" when you first climb that hill and see the world laid out in front of you after first leaving Monitor. There's all sorts of things like that that I'm incorporating, usually with reasons behind them.
But I'm keeping as much the same as I can, as I said. If you walk into the provisioner in Fawn, you will find glass-top counters with a sextant, mirror, wineskin, backpack, bedroll, etc inside it, and a room with a loom, spinning wheel, etc (though the shop is now two-stories high and placed slightly differently).
As for the numerous comments on Oblivion being a bad engine, it really isn't. It can do everything Morrowind can do and more. The main reason Oblivion seemed to fall short of our Ultima-like dreams is that the developers made the choice not to make the most of the engine. People go about their lives by going to work, then to bed where they sleep, but when they are at those locations they just kinda stand there and have generic conversations occasionally. The engine allows for a lot more to take place.
I'm not sure why some people are so opposed to the Oblivion engine. What makes it so bad in your opinion? (it is especially strange when it is called worse than Morrowind's engine since there is nothing that Morrowind can do that Oblivion can't... Oblivion just has better graphics and some more features) Maybe if you let me know specifics that you find bad about the engine, I can help alleviate your fears (as I have messed with many of the features with Oblivion, such as dialogue, schedules and companions, in order to make it more Ultima-like)