I just got done replacing the knock sensor on my 86 (originally, it wasn't even connected :eek). As Hoosier says, it's just in front of the starter. However, if you plan on working in that area, I seriously suggest using a lift - with ramps, you have about zero clearance and no line-of-sight, and with jackstands you're not doing much better unless they're at their highest setting. Also, as it's practically on top of the right-side exhaust, make sure the car's cool before working on it.
The sensor has a round lip on the outside and the wire fastens to this with a couple of fingers. If you've got the original connector, chances are you'll break it while taking it off - being so close to the exhaust, the plastic gets real brittle. It was pointed out to me that the connector is the same for pretty much any GM engine from 84-91 so it's easy to get at a junkyard.
Finally, if you want to remove the sensor, drain the cooling system first!
[RICHR]