97 2.5 Milli misfire and power issue we cannot figure out! Help!

Hello;
Here is the situation. I have a 97 2.5 millena, the engine was replaced 2 years ago so new engine has only around 20k if that. I just purchased the car and the problems Im having were existent when I got it. I had a mechanic do several test, diagnostics and troubleshooting with little or no luck. The codes that are coming up are Cylinder 1 misfire and P0147 (O2 sensor code). The actual physical problems I am undergoing are mainly related to power and accelerating. Car starts great, idles slightly rough, if you rev engine in park it will cut out and backfire. When driving it will hardly accelerate, if I lightly tap gas it helps a little, once making it up around 40mph it will***** and jump a little and sometimes kick in and accelerate fine to 60-70mph but you can still fill it********/missing while maintaining a set speed on hwy. If I floor the gas it completely bogs down and backfires loudly.

Here are the things we have gone over and tried to diagnose with no fix yet.
Compression in all cylinders perfect
Changed spark plugs
Changed Distributer
Changed wires
Took off exhaust and gutted CC (due to it being entirely plugged) and reinstalled exhaust (I forgot to mention that on one drive, we stopped car and CC was burning red color, revved engine and a big chunk of flaming hot metal came flying out of tail pipe! This is then why we gutted CC.)
Cleaned entire Throttle Body
Checked most sensors by unplugging and running car to see if any changes occurred
lastly we tore apart everything to get to timing belt and see if it had possibly jumped timing and the timing was perfect! (We were sure this was the issue causing the misfire and acceleration problems)

If I think of anything else we checked, Ill post, but this is all I can remember right now.

Please please please help! I can only hope this is something simple that we just havent caught. Hoping its not a computer going bad. Any and all help or suggestions gladly appreciated. Thanks
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Blue Eyed Vanilli with a few Milli~ And not the kind I could use to pay all the bill$, I got the kind that has 4 wheels!

1995 2.3 miller engine, 110k (not running)
1996 2.5, 180k (barely hangin on)
1997 2.5, 20k on new engine (problems we cannot figure out!)