It took you 120 hours to figure that out? Have I missed a joke or referrence to why you call it 'Shimmering Isles' rather than 'Shivering Isles'? But it's been a year since I played, so between OOO difficulty and my rustiness, lots of quicksaving/reloading going on. *All of my playthroughs have been with OOO, actually.
Unlike the kids on the bethsoft forums who treat (ie, abuse) Sotobrastos like he's a paid game developer, I'm willing to wait until he's painstakingly corrected Bethesda's mistakes manually tweaked everything about Shimmering Isles. I'm just getting into my newest playthough of Oblivion with OOO*, so I think I'll be busy for quite a while with that, without worrying about Shimmering Isle for now. Some folks are reporting that some containers still pull from the levelled loot lists that OOO has modified, but that's about it. Looks like there isn't any direct incompatability between OOO and Shimmering Isles, but Shimmering Isles is essentially completely unaffected by all of the gazillion changes in OOO. OOO is working fine with the 1.2 patch, although both MMM and Frans are acting a bit wonky (ie, crashing, etc). I should find out if either of those are broken.
For me at least, I think the only real important mods to have installed are the leveling mod (Oscuro's Oblivion Overhall) and the monster variation mod (Martigen's Monster Mod).