Yes, the heater circuits will burn out eventually, and those error codes are accurate - if the heater circuit becomes an open circuit it is easy for the ECU to determine this.
Even when the O2 sensors themselves still seem to be working they can become slow to react which causes a slow deterioration in mpg.
Water pumps can last 150k miles but most people will replace when replacing the timing belt as the labour cost can be the biggest expense. Normally you get a bit of notice that a pump is on the way out, either it starts to leak or whine. On the IS200 it isn't too serious if the pump seizes because it isn't driven off the timing belt, you just run the risk of overheating the engine if you don't notice quickly.