I looked around a bunch for more detail about this and didn't find everything in one place, so I thought I'd share what I did in case it is useful to others. As they say, your method may vary, this worked for me.
The modification is designed to eliminate the check engine light triggered by the OBD codes triggered by the piggies creating more flow than stock. The goal is to place these spacers in the rearmost O2 sensor bungs at the front of the catalytic converter which fools the computer.
I wasn't happy with the accuracy and fit of the spacers made using the drill through techniques I found as I looked around so I tried to make refinements.
I grabbed one set of "Dorman HELP! 42002 Spark Plug Non-Fouler" - 1 package (2 units in package - under $5 for the set) - from a nearby chain auto parts store in the aisle where they have emergency repair parts.
The part is a 18mmx1.5 pitch spacer made for spark plugs, but the thread matches the O2 sensor bung thread pitch. This is in a bunch of DIY already on this site and others.
They offer a few different lengths of these spacers, and this one (p/n 42002) happened to be the size that fit in the space I had available on my 2004 B6 S4 (a similar mod for my b5 s4 used two spacers, one drilled completely through, one as-is, stacked). They have both longer and shorter ones where this technique may or may not work.
Next, I took a spare Bosch O2 sensor and the non-fouler and measured the differences in depth - I found that I needed to create a cylindrical relief hole inside the sensor that was 5/8 in diameter and ~3 mm deep(er) to make space for the main body of the sensor below the threads. Using a 5/8 HSS drill bit in a drill press with a depth setting, I centered the non-fouler clamped in a drill press vise and drilled to depth (slow speed drilling with cutting oil). I had to be very careful on centering since the 5/8" drill came very close to the inside threads.
I also measured the tip of the O2 sensor and decided that I needed additional clearance for the tip to allow the sensor to fully seat. I used a 7/16" drill and set the depth to 5mm and drilled it (again, slow speed drilling with cutting oil).
With these stepped holes I was able to fully seat the O2 sensor into the fouler.
Some of the versions I've seen have you drill all the way through the non-fouler - I opted to not drill a through-hole in the non-fouler keeping the existing hole as delivered. My theory was that this would slow airflow and assist with fooling the system into thinking the precat is still there.
To install, unplug the electrical plugs for the rear O2 sensors from the firewall (need to move the coolant reservoir to get to the driver side plug), fish the sensor wires down beneath the car and remove the sensors (you might need to deal with a wire tie connecting the O2 sensor leads above the transmission - I didn't because I had removed it previously). I installed the first non-fouler onto the passenger side sensor and then reinstalled both into the O2 bung. The drivers side sensor was a very tight fit (it interfered with the passenger sensor during installation), and I found that it was easier to install the non-fouler first and then thread the O2 sensor in after. The wire ends of the O2 sensors nearly touch when installed in the stock locations. I used a wire fished down from the engine bay to thread the sensor wires back up through and then reinstalled them.
None of this is new, but it is another approach that might add to the collective knowledge. It is working for me.
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