Where is the best place to weld in a bung 02 sensor, on a water jacked system.

I have mine welded in the tail pipe, about 1" down stream from the joint.

Depends on the system. You're going to have to put it somewhere that it can be welded on both the inner tube and th eouter. Probably right at the junction between the manifold and the tailpipe is best. Most exhaust manufacturers will do the mod.