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I keep all my downloaded mods in a "Öblivion Modding" folder inside "Downloads." I press "Create" and then Add Archive and click on the downloaded 7.z etc archives, and create OMOD.

Is there anything wrong with this?

For example the OOO page on nexus says:

1. Extract the archive to any other folder.
2. Copy the extracted archive to [Install Path]\Oblivion\OBMM\Mods\
3. Start Oblivion Mod Manager
4. Click the Create button
5. Click the Add Archive button, navigate to the archive and select it, then click the Yes button.
6. Click the Create OMOD button, wait until it finishes, then click the Ok button

I don't do steps 1 and 2, I just add archive straight from the downloads folder.

I don't see why not, of course, the easiest way to test is to see if the mod is in your game.

Redguard OfTheEmpire wrote:I keep all my downloaded mods in a "Öblivion Modding" folder inside "Downloads." I press "Create" and then Add Archive and click on the downloaded 7.z etc archives, and create OMOD.

Is there anything wrong with this?

For example the OOO page on nexus says:

1. Extract the archive to any other folder.
2. Copy the extracted archive to [Install Path]\Oblivion\OBMM\Mods\
3. Start Oblivion Mod Manager
4. Click the Create button
5. Click the Add Archive button, navigate to the archive and select it, then click the Yes button.
6. Click the Create OMOD button, wait until it finishes, then click the Ok button

I don't do steps 1 and 2, I just add archive straight from the downloads folder.

Don't add the archive folder straight from the downloads folder. That's a mistake you are making. Extract the archive to any other folder and then copy it. That's what the OOO page tells.

If you get something 'working', don't change it (may break it again). But recently I've moved onto Mod Organizer 2.