Well. I'm sure someone else can tune in better about how the o2 sensor affects the timing and fueling and junk.
But from my understanding, an active o2 sensor is GOOD thing. The reason it throws that code from my understanding is the location of the o2 sensor or the added exhaust. Either way, if your o2 sensor is good, toss the code. Secondly, blips of KR is not uncommon. be glad its not a steady 2-3*it could be false, but as light as it is i just imagine it's legit. i didn't bang in my firewall and mine clears just fine so who knows.