Here goes - Unplug the oxygen and sensor but still leave the frequency valve connected. This should give the freq valve a fixed duty cycle.When you unplug the oxygen sensor, the lambda computer thinks it has failed and puts the mixture into "limp home" mode which is over-rich.
If the engine now idles OK, use an oscilloscope on the oxygen sensor and see if it switches OK (should be a square wave between 200mV and 800mV with frequency of approx 1Hz).Even when you've unplugged it? The oxygen sensor works like a tiny little battery and provides a voltage according to how much oxygen is in the exhaust - the more oxygen there is, the leaner the mixture. If you've unplugged the sensor, it'll stay constant at "too rich" - or am I missing something here?
If you have a cat bypass you could leave the oxygen sensor unplugged and set the CO to 1.3-1.5% to run in open loop mode and reconnect the oxygen sensor. The CO should drop to less then 0.3%.This is waaaaay to lean. The lambda system is designed to function at around 1.0%, however without a cat you can partially eradicate the effect of the lambda system by tuning the engine to 1.5%, which is how the B28E is set up. If you adjust the mixture so that when the lambda sensor is plugged in it reads 0.3%, it'll be a tough car to start on a cold morning, and you'll lose a lot of power.