Just talked to another forum member on the phone, and got it cleared up. Here is how it works:
Two white wires (sensor side) are the heater circuit. They should be getting 12V from the brown and blue/green wires. (The brown is the ground; the blue/green is +12V). On my car this isn't working. The two white wires should NOT have any continuity to chasis ground when the O2 sensor is unplugged. If they do, this means there is a short.
The black wire (sensor side) that goes into the single plug is the signal from the sensor itself to the computer. This is what varies from 0V to 1V. The ground for this signal is the gray wire. This ground is seperate from the chasis ground. Mercedes appearently did this to help with signal integrity; the chasis ground can have a lot of noise.
My O2 sensor is in fact working when I test from the black wire (sensor side) to the gray wire (sensor side).
Hope that clears things up for people. Now I need help solving the heater problem: I'm getting 0V to the heater. Anybody know if there is a fuse for this?