Hey guess what, after resetting the battery, the quick flash of the alarm LED is gone and the car starts right away. I think it is very likely the PATS system that got in the way.
Another interesting find: my irratic speedometer needle now is also behaving well. No jump up and down for the 35 miles I travelled this morning. I will see when I leave if it is the same. Or simply because the temp is cooler this morning? I haven't got a chance to check the wire connection between the VSS and the gauge cluster yet. If this problem is gone, then I wonder the speedo reading is actually having something to do with the ECU. Like Tony (CSVT1214) said that one time he hooked up an E1 cluster with an E0, the speedo simply won't work and the fuel was in the opposite direction. That indicates somewhat that the ECU may also control the speedo. I am not sure and will have to give it some time to see if this is indeed the case. So I will hold off my purchase of a new VSS just for now.
The O2 sensor will be installed this weekend. I now pop either P0153 (or/and) P1151 every other day.