EDIT: version 2 -- segmented the instructions better. Now vanilla and OpenMW are totally separate and Optional mods are found in the end of each instruction set, where they hopefully don't overwhelm the reader.
The installation instructions provided in the latest readme file were outdated, due to the switch to the new BAIN folder structure. Also, so many people now are using OpenMW that it seems prudent to include instructions for it. Here is the rewritten section II: