"BMW 523i, 1996, E39, 256S3. Fault code present is 203-O2 sensor bank 2 performance cyl 4,5,6. Live data shows both sensors are open loop until temp reaches 80C, then both go closed loop but only bank 1 switches, bank 2 stays at 4.6v, at this point engine runs smooth, after a few minutes bank 2 goes open loop and bank 1 remains closed loop and engine runs a bit lumpy."

What is the voltage on Bank 2 sensor after it goes Open loop and the engine starts running lumpy???

This is important as has been pointed out by others re air leaks.

"Gas readings when fault present - O2 5-6%, HC 800, lambda 1.2-1.3, "

Readings indicate a lean misfire. Was the HC reading drifting up and down?

"gas readings for the few minutes that both sensors are closed loop even though only 1 is switching are within limits (i wouldnt expect them to come right down low instantly as it just come off a fault). "

0.45 to 0.495V are with the ECM's programmed Stoichiometry range BUT the ECM would expect to see some switching after engine reaches NOT.

Any codes stored???

Cheers

PeterW