Yeah, I always install the gun oil mod, then mod it some more in xEdit to add support for various custom weapons.
I know the gun condition is just a game mechanic - not a bad one either. It's just not very realistic. :) No matter how old the gun is, it's generally either going to explode in your hand, or work perfectly, depending on how it was cared for over the years. There are lots of guns that are hundreds of years old that are still being fired today - collectors pay a LOT more for a 300 year-old gun that can still be fired than a 300 year-old piece of rust that looks like a gun. :D
My own thought for how they should have done it was the gun condition as a measure of it's cleanliness. Once a gun gets too dirty, it starts to jam, misfire, and have a chance of exploding in your hands. You clean the weapon instead of fix it. Damage CAN be done to weapons... by attacks or jamming or misfires. Once a gun is damaged, it can't be used until it is fixed by replacing parts, like a new barrel, etc.