ADVICE PLEASE! oil change gone bad!

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After an uneventful 70,000 mile oil change on my 2005 RX330, I drove a few blocks and the check engine light went on and the VSC light went on andI noticed a burning smell. I drove back that few blocks and left it at the then closed dealer. The next day they say I need a new 02 sensor and a valve cover gasket seal total bill $1025!
I had no problems before the oil change!
Since, they have covered the02 sensor under goodwill waranty and reduced the price on the seal for the gasket cover to $433.
They say they put in 7 quarts of oil and that after driving those few blocks I had 6.3 quarts. do you think I could have lost over a half of quart of oil from the seal leak wothout ever noticing a problem the 5000 miles I drove between oil changes.
Do you think they could have overfilled my oil causing frothing and a blow in the seal and a bad 02 sensor?
Help! Please need your advice.
Patty