Chances are that the lambda sensor had simply died with age.

However, now you have started messing with things, I would recommend getting it to a local (or trusted) tuner and getting it all reset back to correct settings as you could end up spending a lot of time and money chasing symptoms that simply will not be there if set correctly.

They can check the lambda readings @ the same time.

If that does not cure it, I would look towards the ECT sensor.