Possible O2 Sensor Problem (W210)

[MB Life]

I have a 96 E320 (W210) that has been acting funny.

I had a Check Engine light that came on about 2 months ago. At the time, I called my mechanic who told me that I can ignored it and so I drove my car for 2 months without any problems.
Well, since then After about 20 mins of driving, when the car is idling (600 - 700 RPMs), the engine will stutter. As soon as I press on the gas, it will be ok.

I took the car in to my mechanic and he hooked it up to a computer that showed a O2 sensor error. He reset the car and told me not to worry about it. Well, I asked if resetting the car will make my stuttering problem go away, he said it should but if not, bring the car back in and we will replace the entire electrical harness. I thought this was a bit drastic so I am here to ask for a second advice.

Question:

Do you guys think that this stuttering problem is connected to the O2 sensor? if so just where is the sensor located on my car? I have no idea what it even looks like. (if you have a picture or a diagram, I would appreciate a copy)

If not, what else could it be?

Thank you in advance.