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The challenge you have in Cali is testing the result of your work. They've got you over a barrel if you're anywhere near as close to the deadline as you are. You can't analyze the gases yourself without a treadmill and sniffing equipment.
Two causes of the 232 stick out in my mind: holes in the exhaust system, and holes in the intake. The oft-given advice to squirt stuff around the manifold to find a vacuum leak is a relic of cars which did not have computerized engine management. It does not work like you are expecting. I would just replace the manifold gasket, if it has not been done; guaranteed it is crumbly by now if original.
Exhaust gaskets and downpipe holes are a bit easier to find with a stethoscope, but even so can elude. The problem you had earlier with the swapped plugs may have sooted up the O2 sensor, so you could put a new (universal) in, a new intake gasket and give it another spin on the dyno, but I know that costs money and it is just a gamble from the distant perspective I have.
But your option 2 should get things squared away if only you find an honest and skilled technician. She would probably smoke test your intake and exhaust instead of just telling you to get another cat and oxygen sensor.
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Art Benstein near Baltimore
Flowers leave some of their fragrance in the hand that bestows them. -Ancient Chinese Proverb
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