Disabling EGR would cause a richer condition, everything else being the same. All the oxygen sensor does is detect how much actual O2 is in the exhaust, and it STILL sounds like a vacuum leak to me...or mebbe a bad EGO or connection to it. Either case, check 'em out. There's a lot more that could be causing this "lean" condition on the one sensor (odd that it's just one not both, eh?), but check the connections for now, and make sure the EGO ground is connected where it's supposed to be!!!
It may be a good investment to get an MSD box, since EGR and timing are closely related. Now that the EGR's disabled, you would benefit from a separate ignition system. Good luck finding the problem!
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Capri306, Moderator, The Mustang Works Online
1979 Mercury Capri, 5.0L -- C4 -- 2.73
1987 Mustang LX Notch 