[James]

If you have a Dremmel tool, I would grind it from the inside by making a groove in it and being careful not to damage the threads too much. This would allowed the metal to collapsed and break free. Once it is removed use the proper size pipe tap to clean out the threads, don't remove anymore metal or the sensor won't tighten down for a water tight seal.

By the way, I don't know if you tried this before removing the water manifold. I always remove the fittings before removing removing the manifold from the engine, it is like having an extra hand helping to hold the part while taking the things apart.