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1) Is it really 'the computer' that's crapped out or is it something else causing the car not to start?
I would guess that your visiting mechanic checked the fuel pump fuses. One's located on the panel (I forget what number, but you could check and turn them all) and there's another located under the hood over the drivers side wheel. It's one of those horse shoe shaped "modern" ones. I think it should be a 30 amp. They (and their holders) are known to go bad and keep a person guessing about what the problem is.
My car had the same symptom, and although it could be the ECU, my guess would be the ignition computer. They go for about the price you mentioned. I got an ECU from a junk yard for a lot cheaper - $25.
2) Why the bad gas mileage and any suggestions to make it better?
I think that mileage is about average for around town. You could clean the thottle body and check the flame trap.
2) Would replacing the O2 sensor help the poor mileage situation?
I don't think replacing the O2 sensor would help with the mileage, but I could be wrong about that. I replaced one to fix an emission problem.
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