While inspecting my wiring harness I found a short between the O2 sensor wires. Not the heater wires. The green 'wire within a wire' going to the CIS-E had pinched together and rubbed off the insulator exposing the two wires to each other. Realizing that this most likely put the unit in limp mode, are there any other problems this may have caused, burning up the sensor itself or the circuit in the CIS-E etc.?

I would say it won't damage anything as long as heater wire isn't short.

Your engine management system only receives the signal from O2 sensor, short the receive port with ground won't damage the computer module. also the O2 sensor outputs very low power signal, not enough to damage itself as all.

Different story if heater wire is short.

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99 BMW 540i 6-speed 110K Km
03 SAAB 9-5 wagon 80K Km
92 400E (Sold) 245K km
Still missing the days with the Benz, it kept me busy.

Thanks Carman850. I was hoping the only problem would be that the sensor was sending garbage data to the CIS-E.