I think It will read lean if you have a lean misfire. The 02 sensor measures the oxygen left over from combustion. In the case of a lean misfire there will be more unburned oxygen left over due to incomplete combustion caused by a lean mixture.
Years ago Popular Hotrodding magazine went through a 1982? Chev Malibu wagon. Came with the limp wrist 305 that leaked oil, TH200 trans and 2.56 gears.
They pulled the engine and trans. The engine was rebuilt with a stroker 3.75" crank and 0.030" overbore to give 334CID. They installed a Comp 268H cam, a fair cam for street. I forget the intake they used. The car had the feedback Rochester carb. They replaced the 200 trans with a 700R4.
When they went to the strip it would lay over like it was lean. They did all kinds of tricks to tune the lean condition out. Finally a reader following the build called or wrote to inform them the cam had too much intake timing and overlap. The O2 sensor read the exhaust gases as rich and leaned the carb. They installed an Engle cam with slightly less duration but more lift. By then the carb was messed up so they got a replacement Holley feedback carb. End result was 15 something in the 1/4 with the 2.56 gears and 26MPG on the highway.
An AFR guage should read real close to what is in the exhaust. Placement of the wideband O2 sensor is important and should be a heated sensor. Any exhaust leaks will provide a lean reading. Once that sensor is supplying its output to a controller, the controller will try to bring the AFR into its fuel map range.
