#1The boss for the O2 sensor is already there. That's why I figured I could just drill and tap that one.
#2Somewhere I read that I need the heat from the exhaust manifold to make the sensor work right.
#1. Is it the style with the two studs or the threaded style, most Toyotas I have seen have the two stud style).
If its the stud style and the studs have snapped, yes you can drill them out and re-tap the holes.
Just be carefull they like to break drill bits as well as easy outs.
#2. The sensor works off the exhaust gases/heat from the motor.