Thanks both for your inputs.
Here's how it ended up:
I called the service manager after the car had been in three days (just for this 2nd visit) and was told they were replacing the catalytic converter. The service manager looked further into my car's record and discovered that the O2 sensor had been replaced last April by the previous owner.
In the end, I got the catalytic converter and O2 sensor replaced for free, plus an alignment, 2 floor mats and replacements hubcaps for my troubles.
I am all in favor of independent shops and doing some work myself (thought about changing the sensor myself) but, on this go around I would have spent a whole lot of money on parts if I wasn't going through a (honest) dealer and getting the whole shebang done under warrantee.