The EGR temp sensor is used to determine whether the EGR system is flowing or not based on the temp. But it's a very very very high level look into the system.
Think of it this way....it'd be like if the ECU was determining fuel flow based only on coolant temp sensors (no MAF, no O2 sensors, no knock sensors, etc). Now the ECU could actually get a fairly decent idea of how much fuel to dump based on operating conditions (speed, RPM, etc) and the engine coolant temp. If it goes up your running too lean and need to dump more fuel, if it goes down too much you need to lean it out some.
But that's an extremely wide range. Much of the time the engine would be running too lean, but the engine coolant would be just fine. Or it would be dumping fuel, but the engine coolant would be fine.
No one would design a system that way because much of the time that your sole input (coolant temp) was registering fine, the amount of fuel being dumped into the engine would not be correct. There would be no way of adjusting for the injectors being plugged, or the fuel rail leaking, or a bad pump, or a blocked filter, or any of a dozen other factors.
The EGR system is somewhat similar to that example as the amount of visibility that the ECU has into the system is incredibly simple. Often when there is no flow (or too much flow) the ECU thinks that everything is just dandy with the EGR system. That's the huge gaping hole in your theory that the ECU adjusts fuel based on the EGR system, it'd be like adjusting fuel based on the coolant temp without having the O2 sensors, MAF, knock sensors, etc.
The O2 sensors are completely seperate, and if they don't like what they see they will throw their own code (or the ECU will adapt accordingly), so they don't really apply here.
In many modern engines (I'd say 2000+) what you say is true, but not in older engines. The 60 series had an EGR setup, but if of course did no such thing. Even the early 1FZ's clearly did no such thing as Mr. T set them up to be bypassed from the factory (a non-Cali spec version).
As far as fuel mileage goes, I've said time and time again that there is no point in doing the EGR disable mod to gain fuel mileage. I have not seen one tiny change in my fuel mileage since I've done the mod (in any of the various configurations I've had), and at most people are reporting a 1 to 2 MPG difference, which is easily attributable to other factors (ambient temp, driving habits, traffic, etc, etc, etc). Unlike some rigs where removing the EGR system has made a significant difference (IIRC it does of the 3FE), this does not apply for the 1FZ.
On the opposite side you don't get any worse fuel mileage either.
Which is one of the strongest points to the idea that the EGR system simply doesn't do much on the 1FZ. If it were working as you suggested and leaning out the fuel mixture, then you'd see an MPG loss if you disabled it but left the CEL on. You don't.
It isn't obvious, and the connection between them is corrollation not causation.
There's something called gasket creep which can be caused by an engine running too cool, Bear80 did some research on that and found that might have something to do with the HG failing on the 80's.
Further, most of the HG failures seem to happen more on 1FZ's with the EGR system than without. Now there could be a lot of reasons for that, such as N/A spec trucks simply reporting it more, basically skewing the sample. That's also just the impression I've gotten from reading the various HG threads, which again could simply be skewed. No detailed studies on that.
Anyway, the connection between the EGR system and the HG is tenuous at best, and not really a good reason for doing the mod. For me there are two primary reasons:
1) Eliminate the carbon that goes into the engine.
2) Eliminate the risk to the wiring harness.
There are other potential benefits and side effects, but none that have been as well documented and are as solid as those two. Those alone are a good enough reason for me, but you'll have to decide if that's good enough for you or not.
Here's one of the best pictures I've seen of the biggest reason to do this (stolen from LT's trubo build thread):
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