V1.2.404 of the Oblivion Construction Set has been released. It requires the V1.2 patch of Oblivion or higher.

Bugfixes:

'Fixed error with preview window not displaying art properly.'

This was the largest bug in the V1.2 Construction Set. Unfortunately, there were more bugs that weren't fixed in that version:

Some issues with the Height Map Editor.
The lip-synch generator (using .wav files option) is broken.

There's probably more. And from what I've heard this new version also created some new bugs. I'd stick with the original CS for now, until the community figures out what bugs the CS still has, or when there's another update. But that'll probably take a while.