I just installed the Hitchcock header on my C5 a couple weeks back. I too thought I would have to disconnect the 02 sensor, but it's not necessary, and I didn't.
Unscrew the sensor from the original pipe, this process will twist the wires since the other end cannot move, but the wires will not twist too much, there was no fear of them breaking, etc. When re connecting the sensor to the new pipe, I 'pre-twisted' the wires before attaching the sensor to the new bung. This allowed them to 'untwist' as I turned the connector into the new pipe. I experimented a couple of times as to how many 'twists' it took so that when fully tightened in, the sensor wires were completely untwisted when tightened down.
Sounds more complicated than it really is.