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O2 Sensor and catalytic converter 700

Last year, our 91 740 non turbo developed a terrible rattle along with generally poor running of the engine. I traced it down to the catalytic converter and upon pulling it found the internal "honeycomb" had cracked in two and shifted causing a partial exhaust obstruction. I took a long chisel and hammer and busted up the pieces so I could dump them out, reinstalled it and kept on riding figuring I'd replace it when the exhaust went or when the EPA found out, whatever occurred first. Well, the exhaust just went so will be installing a new cat along with the exhaust system. I would have thought the cars mileage and overall engine performance would have improved without the "drag" of the CC element in the exhaust flow but I think the opposite happened but may be my imagination. Is correct o2 sensor function dependant on there being a functional CC present? The O2 sensor is about 6 months old. Many thanks!

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