Let me clarify:

The highest lambda value I can adjust to at idle is 36% duty cycle (positive lead at term 3 and neg lead at term 2). I can lower the duty cycle (screw CW) but if i try to raise it (screw CCW) to get the duty cycle near 50% the car hesitates and stalls when i go above 36%. I will stop calling this enriching or leaning the mixture since that is the wrong way to describe it.

Duke, you said to target arround 50% but I can't get there. Can you tell me the likely cause(s) for this scenario?

I checked for air leaks and found none. Should I keep looking for air leaks or are there other likely suspects if the engine can't be raised to 50% lambda?

I assume my smog values are not very useful since it was smogged before i replaced the defective O2 sensor.

FWIW, here are the smog test results at 15 mph (25mph values are not much different) with a defective O2 sensor.
CO2 5.56%
O2 3.89%
HC 538ppm (gross polluter)
CO% 11.69% (gross polluter)
NO 92ppm (pass easily)

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1972 450SL
1982 300D Turbo