Does cleaning an oxygen sensor with Steelwool damage it?

Your best bet is to replace it when you can. They are like spark plugs. Cleaning them may only be a tempory fix. If you feel you wan to clean it, though, use a can of propane and run the flame over it from about 2-3 inches away from it. Normal colouring for an O2 sensor is the same as older spark plugs: a light tan colour.