Andy Robinson's men failed to put away tournament champions France on Sunday, despite holding a 12-point buffer at half-time.
The French, eventual 18-17 winners at Twickenham, have moved up to fourth in the standings, with England down to sixth.
Ireland rise up to fifth - on the footing of their 40-13 defeat of Scotland on Saturday - comfirming their stature as one of the Six Nations title favourites.
O'Sullivan - who presided over his 30th win in 41 games, against the Scots - has guided his side to nine wins since the start of 2004 - while also losing to France twelve months ago, and Tri-Nations winners South Africa twice last summer.
England, on the other hand, have lost eight of their last 13 games.
Scotland are tenth - just below Fiji in the official standings - while Wales and Italy are unmoved in seventh and eleventh respectively.
OFFICIAL IRB WORLD RANKINGS:
(1) New Zealand 90.90 Rating points