hey, just read the whole post, sucks that your having this much trouble.
yeah the second o2 may have something to do with it, maybe.
theres no need to try obd1 anything.
if the car, engine, and ecu are all obd0 then try another obd0 dizzy.
the problem is that no parts stores carry the dizzy for obdo b16.
i had to replace mine when i first did my swap and had to order one offline.
are you sure that theres no antifreeze in the oil? try changing the oil to know for sure. a friend of mine did a b20/vtec and after he got it started it wouldnt rev past 3500, turns out he blew the head gasket.
and how exactly did your friend time it? if he adjusted the belt and it wont start now then he most likely bent some valves.
but i would try the dizzy first. if you know somebody with a b16 then ask if you can swap their dizzy just to see.