that is not the o2 sensor, but that is an issue, rtv or silicone sealer should fill the gap.. and fix a problem there.

the o2 is in front of the engine, look in the space between the vavle cover that says etecII and the radiator support, youll see shiny metal covering the exhaust manifold. in the middle of that is a spark plug looking thing with a wire built into it, that is the o2 sensor, you have a 2nd one further down the pipe a well..

depending on where the leak is, it could also be affecting your fuel mileage.. the cai increases power more that fuel economy at all levels (more air more gas) so if you want all mpg, you might want to stick with oem..