The surging idle is due to the IACV (idle air control valve) located on the backside of the intake manifold. Some people have had success cleaning it out with carb cleaner, but I've never been so lucky and always end up replacing them. However, since the coolant temp sensor and IACV are part of the same system, try replacing the temp sensor first (especially since this is what you're getting an ECU code for).
The cold/high idle circuit is controlled by the temp sensor, IACV and ECU. The ecu reads the temp sensor then tells the IACV when to close. If the temp sensor or IACV are faulty, then you end up with surging idle.
It's been a while since I've worked on an stock motor, but I believe both coolant sensors are located on the side of the cylinder head. 1 is for the ECU to monitor and 1 is for the temp gauge.
Don't believe the guy at Advance, you already know more about your car than he does. Your car only has one O2 sensor located on the exhaust manifold.