I installed the new 1" bungs right on the surface of the pipe to get them further out of the exhaust flow, instead of recessing the bung. Innovate says they don't need to be in the flow, so why not keep them protected by being further away. The tip of the sensor is even with the 1" bung, so I guess it's about 1/16"-1/8' off the pipe. It works fine.
I used the bungs supplied by innovate and basically flush mounted them. It seems I always have one of the two O2 sensors that doesn’t heat properly. Cycle the ignition once or twice and all is well.