Yes they do but you can use the gen III sensors with the extension harness I posted the link to.

where on the side of the block would the sensors go? thanx

I just bought the parts to do this myself.

I got the ACDelco sensors $38.75 ea. and a FelPro gasket $50.97 at Amazon.

Then thought I just go to the dealer to make sure I got a good genuine GM harness, paid around $30. I get home and look at it "Made In Serbia" Haven't seen that before, usually Mexico or Canada.

Might start on the project tonight.

you cannot relocate the sensors on a gen3 block though, correct? I hate the fact that they're under the manifold and a pita to get too.

Yes you can, I moved them on my wife's LS2 to the side of the block.

Is it as simple as getting the adapter harness and drilling and tapping the block? Or, do I even need the knock sensor?

My wife's car already had bosses that were tapped on the side of the block but you could make a mounting block to screw the sensor into and use one of the existing tapped holes on the side of the block.

There's varying opinions on whether you need the sensors or not. Most tuners turn the sensitivity down once performance camshafts are installed since fast valve action tends to create more valvetrain noise which the knock sensors can see as detonation and the ecu starts pulling timing. How much the sensors are really doing at that point I don't know, but having them installed isn't really hurting anything so I prefer to keep them.