OBSE, or Oblivion Script Extender, is a third party program that extends the scripting capabilities of the engine. It's required for a lot of different gameplay mods that need scripts outside of what the game can provide.
You install it as you would in Oblivion, just instead, wherever you have Nehrim. This is merely a 'drag and drop' action from the downloaded archive to the Nehrim
main installation directory. [
Not 'Data', as most mods.]
With it installed, you can use a variety of mods that change the game, extend the gameplay, add new functions, et cetera.
After OBSE is installed, you can install OSR [Oblivion Stutter Remover] by dragging it over where it says in the installation, as it is an OBSE plug-in. OBSE itself does the rest.
You have to start the game via OBSE [or OBMM, the Oblivion Mod Manager] for it to take effect, not the Nehrim launcher or the Oblivion.exe.
As for the blurriness, are you using AA through the game or AA through your video card? Bloom+AA may be causing the effect. I have had no blurry halos in my game, but I use HDR in the panel and I force AA through my graphics card control panel.