Dan,
Before you do anything else, I'd have a look at what is causing your wet cylinder. I had a similar problem and it turned out, the rings in one cylinder had not seated properly. Ugh. The solution involved new rings and honing the cylinder. I hope that is not your problem!
It's doubtful your O2 sensor is bad although oil from the wet cylinder may be fouling the O2 sensor. When you remove it, you'll know.
Good luck!