It does sound like your 02 sensor may be screwed up. Also, with a new DP and no cats on an 04 STi, you may be getting fuel cut. Do you have a cat back exhaust on too?
The perrin simulator works, but I can't say for sure it is the cause of your CEL and blinking cruise light. Do you have a way to "pull" the CEL so you read the code and post it here?