assuming your talking about your 03 specv, which only has one bank of o2 sensors.
sensor 1 (green connector) is the sensor thats the the top of the header (no foulers)
sensor 2 (blue connector) is the lower sensor thats closer to the ground (needs 2 foulers)
with your header, you should foul out your lower o2 sensor, here's how
if your code was for sensor1, you should NOT have spacer or foulers on this top sensor. it may need to be replaced, use only denso or ntk / ngk o2 sensors, make sure it comes with a connector for easy install.
in regards to your othe thread, this would be a good reason you have bad mpg. with bad o2 sensor readings, the ecu will richen the afr for safety, causing worse mpg. once youve corrected your o2 sensor issues, you should clear your codes, either with a scanner or via pedal dance.