No price has been announced. Knights of the Nine will be available for download through the usual channels (XBLM, OblivionDownloads.com) as well as a boxed expansion set (for PC only) that includes all the downloadable content (currently valued at $13.53, or $11.54 sans Horse Armor).
The PlayStation 3 version of Oblivion will come with Knights of the Nine. It was originally thought that this quest would be "exclusive," but we all know how finicky that word can be.
[Update 1: clarified boxed package is PC only. Sorry Xbox gamers!]