Hi, because the O2 sensor was a 3 wire and the signal earthed through the body of the sensor I checked the continuity between the sensor body and the heavily corroded exhaust - 3.5 kohms!
Removed the sensor filed the surface where the washer contacted, now 0 ohms. Also fitted an earth cable between exhaust bracket and gearbox.
Although the O2 sensor only had 3 wires it was using a 4 pin plug, the socket on the engine loom did have a wire connected to the unused position. This would have been the signal earth to the ECU, so I cut it and connected it to the cylinder head.
Hey presto the O2 sensor was now switching, the sensor signal reading on scanner coincides with scope, the STFT is now +-7% and CO level dropped from 9% to almost zero.
Thanks for the voltage drop testing pointers etc. have been reading up on this now for future use.

Regards, Martin.