Oxygen sensor replacement
Open engine compartment and unplug the Oxygen sensor. The connection is on the left side of the engine compartment, at a place where several wires are held down with a flexible metal clip. It is a 3-inch long, 1/2 inch diameter black connection. The wire is black on both sides of the connection (as opposed to the other grey wires you will see there).
Jack up the car on the driver's side and remove the left rear wheel. On the catalytic converter you will see a small metal guard plate that covers the outside and bottom of the catalytic converter. This should be removed (about six 10mm bolts).
The O2 sensor should have a small half-cylinder metal guard on it. Remove this by pulling it away from the car. It is held on by a small (but quite stubborn) metal clip. Moving it side to side and up and down seems to help, as oppsed to just pulling it straight out. Put some Liquid Wrench on the base of the O2 sensor unit and allow it to soak in.
Carefully pry out the rubber grommet that is in the wheel well where the O2 sensor wire goes into the engine compartment. A flat-headed screwdriver should do the trick. You should now be able to pull the entire 1.5 foot wire out through the small hole. Cut the three wires at the O2 sensor unit as close to the O2 sensor as possible. If you are not using the official factory part, carefully label one of the white wires on the "outside" of the grommet, and label the matching wire on the "inside" of the grommet. You will be cutting the wires, and will need to know which to match up correctly.
Either use a deep 21mm socket, or the large (and I do mean large) open-faced wrench to remove the O2 sensor. This will most likely call for fitting the wrench onto the unit and using a mallet of sorts to loosen the sensor. The catalytic converter gets extremely hot, and makes for a tough time of getting anything unthreaded. Once it has been loosened, however, removal should be easy.
If you bought the official Porsche factory part, you can skip the next few paragraphs. However, if you bought the generic Bosch O2 sensor, read on. Note: Bosch supplies Porsche with the original sensor unit anyways, and both are completely identical. The only difference is $150 and the connecting plug and wires (covered in the following few paragraphs).
This work can be done inside in a shop, or someplace where a soldering gun can be used safely. Take the old O2 sensor and wire, which has had one of the white leads marked in a couple of places, and cut all three wires just "inside" the grommet (by that I mean on the side that was inside the engine bay). Be sure that one of the markings you made on one of the white wires is on either side of this cut, so you know which goes where. Then slip off the small (4 inch) black tubing that covers the wires on the sensor side of the cut. Determine where exactly the marked white wire goes into the sensor. Then take the new sensor, and mark the corresponding wire by following it from the top of the sensor up throug the black tubing. This way you'll know which wires to solder together. See the digram for a layout of the three wires. One of the two white wires must be marked they can be distinguished.
Cut off the plug on the new generic sensor. This plug won't fit, and is useless. I cracked the plug open so I could cut the wires closer in, and get another inch of length. You should now have two main pieces: a new sensor with three 5-inch wires coming out of the top (with one of the white wires marked), and the original plug with three 1.5 foot wires (with the corresponding white wire marked).
Now slide the grommet onto the new sensor wires, down to the edge of the black tubing. There should be about 4 inches of black tubing covering the three wires. Put three pieces of heat shrink tubing over the old wires, and solder the matching wires together. Slide the heat shrink tubing over the soldered connections and warm appropriately for them to shrink. Now cover all three wires together with some electrical tape. You should now have one large piece: Starting with the old three-pin connecting plug, followed by about 1.5 feet of wire , your new soldered connections, the grommet, then about 4 inches of wires, then the new O2 sensor.
Remove the little plastic guard cap on the new O2 sensor and screw it into the opening on the catalytic converter. Tighten it down sufficiently with the open-faced wrench (note that a socket will not work now because of the wires). Thread the wire through the hole into the engine compartment, and carefully push the grommet back into place. Again, a flat-headed screwdriver might help if used carefully. Connect the O2 sensor wires inside the engine compartment.
Replace the sensor shield, the metal guard on the cat converter, and the wheel. Start the car and enjoy!