I like the idea of being a Blades member who is assigned to one of the heirs and survived the attack only to find him dead along with the rest of the group. Does anyone happen to know if any of the heirs were even in Cyrodiil at the time? It's never officially stated where any of them were when they died.
As far as Kvatch, as cool as those ideas all are, I'd much rather avoid the complications of messing around with anything there. There's too much to consider and far too many things that might go wrong as unintended consequences.
I don't see why they -couldn't- be in Cyrodiil at the time... even though it isn't ever really explained.
As for Kvatch: I tend to agree with the 'too many things to go wrong' view on this...
... but it's still awesome to think about it! This is more like an alternate beginning which ought to get it's own Mod.
For instance! Rather than what was described:
Your character begins in the smoke-filled Guard's Quarters of the Castle Kvatch, having just gotten out of bed (
woken by screams in the middle of the night). Your armor is all in your personal footlocker at the end of the bed, so when a guard runs in and tells you the city is under attack by daedra, you quick grab your gear and run out of the castle to see that Kvatch is burning and swarmed with Daedra. You could fight your way to the main gates through the city alongside Savlian and the guards, collecting those few citizens who survive (including Martin even, perhaps) and help get them to the Chapel.
Then you immediately would get sent on the mission to go through the gate (along with the guy you normally meet there and his friends, maybe?) and have to figure out how to close the damned thing down yourself.
Then, while you're there, you could run into the guy sent to retrieve Martin. (The prisoner who replaces you, and witnesses the Emperor's Death?) He tells you that Martin needs to come back to Weynon Priory... and asks if you will escort them, as the roads are dangerous.
When you get back, everything unfolds just like it would have during the main quest... except that you're actually working alongside the guy who you WOULD have been, had you not changed fate.
... damn, I wish I could mod better for Oblivion. That would be epic!