You never want to extend the wiring of a narrowband sensor if at all possible. If you do extend it do some research on the wire and crimps available before buying (to avoid significant voltage drop and prevent dielectric spiking) and test the results against a calibrated wideband.
Moving the sensor further downstream isn't a good idea either as it may not stay at the required temp unless you take measures to keep the heat in the exhaust system... and even then it may still be too cool. You could install a heated narrowband like the GTE uses though.
With that all said, I've had good luck on two installs by cutting the wire off of an O2 sensor and then crimping a new, harness side connector bought from my local Toyota dealer.
That header looks like they were references a Cali spec MKIII and only accounted for the secondary sensor.... I'm surprised they've never fixed it, I'm sure they get plenty of comments.
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