That is like the best part of the entire game, besides the hospital. Of course, the levels before and right after that are pretty annoying, since it's just a case of constant ascend and avoiding Pyramid Head, but the actual prison is awesome. I was scared witless in the hanging gallows and some of the ambients in that place are torture. Though it wasn't nearly as unnerving as the freaking nurses you met before. Don't fret though, after you pass the prison, it gets gradually less scary, until the very end. Of course, if you hate hate hate the Pryamid Head, you might not want to continue after the short trip to Toluca Lake. Personally, that rowing part was just as unnerving as the actual game levels, the lake was just eerie and you constantly waited something to attack or some encounter to happen. I kept expecting the dead steamship to pass by or something equally cool. Shame really, although if they were going for that silence before the storm thing, they totally succeeded.
I'm still playing Shivering Isles, just entered the Mazken stronghold to kill some orderites and test out the level 13 Madness Longsword(damage health ftw). I sort of missed the whole Dawnfang/Duskfang thing, which annoys me now as I love the whole soulfeeding idea and the weapon would probably have been pretty powerful. Especially because now, since I can beat everything with just using my fists, I could have spammed hand to hand for strength multipliers and finished with the 'Fang. Total powergaming, but it's pretty much the norm, unless you wish to metagame yourself to oblivion(rofl) by keeping a low level. You could outfight anyone in this expansion no matter how lousy a fighter you are, since Bethesda nerfed enemy attack reach and rate(you can fish them for attacks and constantly beat their face, without ever getting hit), as long as you avoided enemy attacks as to not stagger or take status effects. Some enemies also do immense damage rates, way worse than the soppy daedra of vanilla Oblivion. Skinned hounds, mature baliwogs and scalons can keep a constant barrage of good damage up, unlike some stupid Daedroth whose only good attack is defeated by fire resistance or ridiculous dremora who fail to block-stagger strategy constantly.
Heh, I don't know if I've ever played the system so much in a crpg before. Maybe FF 8 gets somewhat near with the nigh-constant character planning and status effect mixing. The game needed that to keep itself interesting though, as every battle was actually just a linear repeat sequence of Shiva/Doomtrain/Eden/Aura+Lionheart-animations.