First make sure the LM1 ground is in the same place as the ECU, and the ground wire is as short as practical. Unfortunately, unless the LM1 has separate grounds for the o2 sensor heater and the analog output, the heater current often will alter the analog output as the heater current is many times higher than the analog out current.
Try adding a capacitor between the LM1 output and ground. Try capacitor values around 0.1uF. This will smooth the output.
You can also add some resistance between the LM1 output and ground (this should be done near the KPro). Try a 10k resistor. This will increase the current on the analog line, making any noise less in amplitude. Too low a resistance and the analog voltage will drop.
If you want to use the digital output you'll need an inverter circuit like this. http://www.play-hookey.com/digital/expe ... erter.html