Hi Shannon.
I just finished fabbing my muffler and I'm faced with the same dilemma. I only have a few inches between the turbo and the muffler. I'm going to locate my bung as close to my muffler as possible and hope for the best. Seems like thats going to yield the most consistent readings.
Your probably aware, the bung needs to be located towards the top of the pipe to avoid moisture damage the o2 sensor.

I have the same exhaust and mine is mounted between the turbo and the muffler. I didn't have to remove the exhaust to install it but the install wasn't easy with it on the car.

If you decide to take it off get yourself a set of these as it will make life easier and any excuse to buy new tools is a good one.

http://media.toolking.com/catalog/pr...ing_Wrench.jpg

The factory's primitive O2 feedback system had the sensor prior to the turbocharger, but that doesn't automatically make it the correct position.

A wideband Lambda sensor should be after the turbocharger, prior to the muffler canister. It should be 15deg higher than horizontal, anywhere in that 150deg arc, but the most common placement is angled aft and at a 45deg angle.

Heat sink -- sure, and additional heat sleeving over the wiring doesn't hurt, either. Furthermore, make some sort of standoff to keep the wires from possibly contacting the turbine housing.

http://forums.pelicanparts.com/uploa...1397061098.jpg

Now thats a sexy exhaust setup. Wish I had that much room. That something you folks built Chris?

Yes, that's our 930 Sport muffler, right side exit (965-style). Completely free-flowing, quiet enough (even without any sound deadening) in the cabin to not drive you crazy on a lengthy road trip though you do have to raise your voice a little to have a conversation.

The car got a N.O.S. Ruf CTR rear bumper, so to give it a more Ruf-ish appearance, we sourced the oval tips from another exhaust shop, then ceramic coated it all black to be low key.