McLaren, I just put my sensor on and was wondering the same exact questions. Here's the answer: You have to cut the new wire and remove that small useless plastic piece, expose about 1/4 inch or so of bare wire, take the 2 largest metal pins in the bag an soder the wire into the pins.
Unhook the current wire from it's "snap" connection under the fuse box. Take the plastic snap piece apart carefully and remove it, you will need this to place the new pins into exactly as they are now. It will be pretty much common sense to you when you see the old one.
PS you must soder these pieces AFTER you pull the new temp sensor wire through the holes alotted in the fusebox. Otherwise you will not be able to get the new wires through if you soder first then run through, hope this helps!