If it's coming through the heater, it's very unlikely to be anything to do with the exhaust, considering the tail pipe is some 12 ft from the heater intake.
Normally smells though the heater originate from the engine bay, mainly from oil dripping onto hot components like the exhaust manifold or turbo. There is a common leak point on these vehicles, where oil from the intake tube drips out of a badly sealed joint onto the turbo, which then burns off making an unpleasant smell inside the vehicle. That's where I'd be looking. The O2 is a red herring, it's not responsible for anything other than monitoring in this vehicle.