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I'm in TX too and have failed the NOX part of the Emission Test. This is what we did; 85 744T w/ 165k (bought as project car)
1) Replaced the O2 sensor and Cat.
2)Checked the Airbox Thermostat (stuck on hot).modified it just to take cool air.(check FAQ on details).
The car passed w/ flying colors..Now, you stated your CAT is two year old, you might not need a new one(depending on the conditions the car was in the last two years).Check the voltage readings on your O2 (see FAQ) before replacing.
If you're in the Dallas area, I could refer you to a good shop that could check out your car..Good Luck!!
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ReySC..'86 744 GLE ..'94 944 T http://communities.msn.com/Reysc/reyscarfriendshobbies.msnw?action=ShowPhoto&PhotoID=19
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