I'm going to try and repost what I had yesterday, though it'll probably be shorter

To start, I don't think you're in a position to create anything that rivals Oblivion. You don't seem to have *any* game development experience whatsoever - a lifetime of playing games does not make you a game developer, not even close.
There is more to creating games than the components. You can bring together as many people as you would like, but without experience you're doomed. Start small, work up. Make a tetris clone with a twist (TetriNET!), Pong with gravity wells, something of that sort. Your first project should NOT be an Oblivion-smashing game.
Like I mentioned last time I posted this: this is like trying to win a gold medal in the Olympics, but having NEVER done the sport before, having no training, and no practice. Learn to crawl before you run.
Here are some more specific crits on your idea:
1 - Talented artists don't work for free. Perhaps if you were a renowned game designer with a history and portfolio of great games, they would. But someone in your position, who seemingly has nothing concrete to offer the team, cannot demand the participation and commitment of highly skilled artists and programmers.
2 - What *do* you offer to this project? We see many people like you, Aaron, people with a lot of grandiose ideas but no means to pull them off. The problem here is, the majority of people can come up with some decent ideas for games - ideas are a dime a dozen, they are essentially worthless; what matters is the ability to get it done. Now, "game designer" - what are your qualifications or experience? I think you're severely underestimating the difficulty of that job. It's very common for us to see people come in with the sole intention of being the "idea man", but contribute nothing concrete to the project - code, art, music, whatever.
3 - You cannot guarantee a major payout. You cannot even claim that you have a SMALL chance of a major payout. You are severely overestimating the profitability of games. Your math is derived from a lack of knowledge of how it works:
3a - For the first part, the average game sells fewer than 20,000 copies. A 250,000 title is a large hit that comes along only once in a while. As a first-time developer (or even as an experienced one) you better be praying VERY VERY hard to expect those numbers, and hope the Big Guy is going to hook you up. 1 million copies is essentially UNHEARD of save the odd exception (Starcraft comes to mind), and even then the majority of the copies were not sold at the introductory full retail price.
3b - Publisher stakes are a LOT higher than you might imagine. A typical take of 20% is already pretty high for a developer, though not unheard of. Lower rates are common. So of a $40 game you're looking at maximally $8 of revenue for your studio.
3c - A game of Oblivion's size is a FULL-TIME 60hrs/week effort for multiple YEARS. At part time, after-work, how long do you think this will take you? And if you say "we'll just recruit MORE people", think about the project management side of it. Are you a qualified project manager? Do you realize the sheer impossibility of managing teams that will necessarily consist of 200-odd people?
3d - No startup capital means you go nowhere. Do you have a legal copy of Visual Studio? 3dsmax? Maya? Photoshop? Or do you intend to build this big commercial success of yours on pirated software? Even without a physical office there is still a MASSIVE cost to developing this game of yorus. Or *gasp* can you do it all in Blender and Dev-CPP?

3e - "Acquiring an expensive engine" is a cost-saving measure, believe it or not. The whole point of buying an engine is because it would cost you MORE to develop it yourself, if you have the means to begin with. I'd suggest doing some REAL research into the business of gaming, and you will realize that fat-cat investors aren't taking all your money, and there's not gold bullion sitting in the studio bank vault. It's a business like any other, and you're not exploiting some secret unknown loophole to make everyone rich.