I don't see how he could have damaged the O2 sensor. It is no where near the Power Steering Pump. If you're mileage did increase, it is either because the old Power steering pump was that inefficient or the Catalytic Converter is being bypassed and that is why it has a code for an O2 sensor.

makes sense because smog equipment reduces gas mileage, but if you have smog checks then it won't pass a smog check if it's not working

Your car has two oxygen sensors. One between the exhaust manifold/s and catalytic converter and the other is directly behind the converter.

replace it. the van probably has more power as well. thats because its getting more fuel. see more power gets you moving faster, then the load is off the engine. eventually youll melt the cats and foul out the plugs

My dad recently replaced my power steering pump on my 2000 Grand Caravan and during the process he damaged the O2 sensor. The light is on, but strangely enough my gas mileage has significantly improved. I went from an average of 18.5 to 21 mpg to 23 to 25 mpg. Does this make any sense? He was going to replace it this weekend for me, but I'm debating now.