Yes, 3-wire sensors like the stock sensor grounds through the body. And yes, the stock sensor is at the top of the downpipe:
http://www.graphics.cornell.edu/~v/pics ... xhaust.png
I don't know if I'd ever say it's okay to tweak the MAF signal with a
potentiometer.
When the sensor is disconnected, the ECU knows it (it applies a bias voltage that an operational sensor overcomes) and does not try to compute fuel trims with it.
But, yes, without the sensor you may well run a bit rich, depending on things like the state of your injectors, your MAF sensor, your fuel pressure regulator, et cetera. One of my cars tends to run a little lean without the sensor, as measured using a wideband.
Why are you sure you're running pretty rich? The "less cylinder space" concern isn't as big a concern as you might think because fueling is primarily determined by directly-measured airflow.
Have you reset the ECU since disconnecting the sensor?
Incidentally, I don't believe the Prius has a wideband oxygen sensor, but it does run closed-loop all the time. It just keeps a stoichiometric ratio even at full load.
"Just reading vrg3's convoluted, information-packed posts made me feel better all over again." -- subyluvr2212