Can someone explain this to me so first I open up Oblivon.esm and the Plugin I wish to edit then edit stuff then save as That Plugin and I should have the plugin and new edited stuff togather right?

You need to load the plugin you want to modify as active. Otherwise any changes you make will be stored seperate from the mod which is loaded, and won't work. You should also backup any mods you plan to edit, and be aware of the original modder's wishes in relation to altering their mod. Needless to say, you shouldn't upload any modified mod without specific permission from the original author. Generally, any altered mods are for your own personal use.

Thanks, Was just gonna fix a little bug in it for myself.