How important is it that the O2 sensor be located in the H pipe between my dual exhaust pipes and what problems, if any, will it cause if it is not located there ?

 

First, where else would you locate it?

Second, its located there so it gets exhaust readings from both banks of cylinders before it gets to the catalytic converter(s). If it doesn't get readings for the entire engine, it will send erroneous information to the computer and the computer will adjust according to the incorrect readings.