There's instructions for testing the O2 sensor on the faq page, I
_think_ that you can locate it if you start at
http://www.automatrix.com/~skip/volkswagon  there's links there that you
can follow to get you the information.

Aside from the multimeter tests (which are kinda complicated, IMHO), you
can also unplug the single wire connection and see if there is
improvements in the running condition.  If so, replace the sucker. 
Consider using a generic.  Plus's for generic--cheaper ($120 or more for
Bosch, $40 for generic).  Minus's--little protector cover doesn't fit
over it so there is the possibility that road debris might damage it,
you have to cut'n'splice wires.  The generic comes with about 6 inches
of wires and a single plug that doesn't match the plugs on the vanagon. 
Bosch comes with sufficient length of wire (about 2') and the right
plugs.  That's the only real difference besides the price.  I've been
running (at least until my alternator blues started!) with the generic
for over 6 months now with no problems.

Tonya
87 Vanagon GL Wolfs
74 S. Beetle