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I would leave the old one in and put another one in the exhaust pipe. The new bung is taperd so you can drill the hole then put it in with out it falling into the pipe. Make sure you don't get any slag on the threads. If you can get your hands on some Aero Kroil I am pretty sure it will get the old O2 lose. I just replaced the O2 on my 86 tonight with no problems.
Do you have the 302 engine that you might be able to help out the thread originator with the location of the o2 sensor wire?
Heating only moderately won't help usually - but if you get the surrounding steel ( or cast iron ) fully red, & hold it at temp for a minute or so, then let it COOL RIGHT DOWN so you can hold your hand on it easily - cold is best, with a shot of lube - it will come out.
Once it has cooled, take it out soon, or it will begin to seize again before long.
Heating it red breaks the rust down into a black powder with no strength but if you try to take it out hot, the threads will bind on each other & tear up.