I think that the presence of nipples are the foremost concern for those who object to the "nudity" nipples are apparently the most offensive part of the mammary and must therefore never be shown to children of any age. But if we consider the role a nipple might play in the modelling of armor and clothing (although I will admit that I have no experience in this matter and will defer to the knowledge of anyone who does), such as providing a boundary for how far the neck of a peice of attire can go. The nipple play a part in determining where a seam might be placed on a blouse or an indentation on a tight fitting dress.
Unlike the Hot coffee mod, which was an intentional inclusion of graphic content, Oblivion's mesh and texture were created to make the game run more smoothly and quite possibly as a modder's resource. The "nipple" on the topless mesh is barely distinguishable from the rest of the breast, and Bethsoft goes to great lengths to make it's content appropriate for younger audiences. For example, in Daggerfall (and Arena?) the book series known as "The Real Barenziah" had very graphic sexual content, Which they removed from Morrowind (and Oblivion) and replaced with the phrase "this passage has been removed by order of the church" They also removed all nude daedra or provided more consevative versions of them for Morrowind. I don't think Bethsoft ever intended for the mesh and texture to be used for this purpose, and while Bethesda certainly expected nude content to become available, they should not be obliged to provide such content for ESRB screening purposes.