So obviously the O2 readings are supposed to fluctuate between 0v and 1v. My question is: over a long period of recording the O2 readings, should they average 0.5v?
Is 0.5v actually the "correct" (as in perfect air fuel ratio) reading.

 

The crossover point is 450mV.... a stoichiometric ratio of 14.7:1. This is the point where, in theory, the amount of fuel and the amount of air will combine perfectly into carbon monoxide and water, with no carbon, hydrogen or oxygen left over. In fact, combustion is never "perfect" and there is enough oxygen left over that is can be measured by the sensor.

And, that A/F ratio is primarily good for low load operation, giving decent fuel economy (15.5:1 would actually be better for fuel economy) and minimum emission.... NOx increases as the mixture leans out, so 14.7:1 was chosen as the design point for the catalytic convertors, the point at which the combined emissions of CO, unburned HC and NOx is minimized.

But, 14.7:1 is not a good number for maximum torque or power... the "classic" A/F ratio for peak output is generally in the range of 12.8-13.2:1. That's why the PCM stays in closed loop, trying to maintain 14.7:1 at low to moderate loads, and uses a much richer value in "power enrichment" mode when you go to WOT. Unfortunately, the OEM narrow-band sensors are not very accurate at A/F mixtures this rich, and the sensors are ignored at WOT.