I can see one flaw in your theory.
I can confidently say that 99.99% of people who have done a conversion with a 1UZ, or any other Toyota motor that runs the CCO sensor, has NOT installed the sensor or any form of trickery during the conversion.
And 99% of these people have not had the problems you've mentioned.
And if they have, it has been for other reasons.
I personally believe that it is just there to sense when the catalytic converters overheat.
They are placed AFTER the cats, where as the o2 sensors are BEFORE the cats.
ECU measured the EGT through these sensors, and if it gets too hot (ie, your cat is now a red glowing mass), the ECU turns the cat overheat light on.
I think back in the early 80's the sensor was directly connected to the dash light, and was just a switch, not a sensor as such.
Anyway, my 2c.
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