1994 960 Sedan with 148000 miles

Here's the situation:

In September, the check engine light came on and the fault code was 2-1-2 (Faulty or missing signal from O2 sensor).

As far as I could tell from the service records, the sensor on the car was the original sensor. So, I just assumed that after 12 years, the sensor had failed.

I ordered the OEM Bosch sensor from FCP and installation went without any problems.

I cleared the fault code and the car was running great.

I drive a mix of city and highway miles and I was averaging right around 20 miles/gallon.

Last week, the check engine light came again. I checked the code and 2-1-2 showed up again.

Needless to say, I figured that the O2 sensor couldn't have gone bad in 4 months.

I took the car into my mechanic last week - They tested the sensor and it was working fine.

They cleared the code and couldn't get it to come back on. Of course, ten minutes after picking up my car, the light came back on.

My first thought was an exhaust leak - I took the car into a muffler shop today and they couldn't find any leaks.

Other observations:

1) My gas mileage is now atrocious - The last tank was 13.5 miles/gallon.
2) While idling at a stop light or in traffic, I notice an exhaust smell in the cabin. The smell seems very rich (too much fuel).

What is the next logical step in determining the problem?

Recent repairs:
1) New engine temperature sensor
2) New idle air control valve
3) New radiator

Thanks in advance for your help.