Quote Originally Posted by Yukimura
At first I thought Oro shouldn't be able to bring natural abilities along with him, but if you think about it, Oro's always been pretty snaky, his eyes, his skin, and then his snake techniques. They don't seem to require any hand seals and to my knowledge the only abilities that haven't required hand seals were activated (bone manipulation and sharingan) and pure chakra manipulation skills (Rasengan and Kaiten). I would find it hard to believe Oro can simply manipulate his chakra into a bunch of snakes so I suspect his snake jutsu is something he developed naturally. If the possession technique granted his snak abilities onto his new body then it seems likely that he can transfer physical abilities from one body to another along with his mind and soul, thus I don't see a problem with him absorbing the Sharingan and being able to transfer it when he eventually had to leave Sasuke's body.

This could also explain the decay. If he's essentially rewriting a body into what he wants it to be with his possession technique (which also didn't require a hand seal) he should be limited to some degree by the available resources of the new body for transformation. If his current body just doesn't have the capacity he needs to be what he wanted to adapt it into, then it would make sense that it would start to fall apart on him as he tries to use more and more of his natural abilities.
I think he's a Jinchuuriki. Actually, I think "he" is a Bijuu, and that he uses the Cursed Seal/Body Transfer techniques to change his Jinchuuriki. For one thing, he seems to have more chakra than his current body can safely use, leading to the degeneration discussed. Like you said, he's "naturally" very snake-like, which kind of points to Bijuu chakra, just like Naruto's Bijuu chakra makes him kind of fox-like. Also, Sasori planted Kabuto in Orochimaru's organization, which might indicate that Orochimaru was Sasori's target.

(On the other hand, it's possible that he's a Junchuuriki that does soul transfer or whatever and brings the Bijuu along. Or that the Bijuu warped his mind into something not quite human.)