Well, I never played Oblivion, my gut instinct, being anti-establishment is to be a rebel, but to be honest, most civilisations only become benevolent federations after the empire model. So I'm going double contrarian and be Empire.
Yeah at the start I was going to be decapitated, but an Empire soldier helped me out. But it's all academic, eventually you will become an all powerful Demigod, if there's an option to become Emperor, that will amuse you for a while, all the lore points at Dragonborn becoming rulers because of the power of the shouts. It's easier to take over the Empire than start a new one. Instead of quoting Conan I'm going with "Cuz I'm worth it" Bawahahah!