PO420 - "catalytic system efficiency..." questions

Hi all, I'm a recent new member and would appreciate any help you can offer.
Subject vehicle is a 96 GMC Sierra 1500, 5.0 liter, 97,000 miles. I am reading a MIL code PO420--catalytic system efficiency below threshold(Bank 1). All the oxygen sensors seem okay, I see their outputs range from approximately .2 to .85 volts, they respond quickly with throttle position changes, and pretty much track each others outputs when graphed. It would seem to me (not a pro mechanic) that the ECM is looking at the differential value between the upstream and downstream sensors relative to the cat, compares this value to a set constant, and stores a code when the difference between these sensor outputs is too small. Please elaborate and/or correct me if wrong - I'm getting back into "backyard" auto repair after many years on the sidelines.

My questions:
1)Could the final oxygen sensor(B1S3) be malfunctioning, i.e. reading high throughout its range of operation--seems unlikely to me, but...?
2)Could an exhaust leak between these two sensor points cause this problem, or would the effect be the opposite?
3)Does the ECM use the last sensor or the calculated cat efficiency value (B1S2 - B1S3) in the engine(fuel) control loop, or it it there purely for monitoring emissions/cat efficiency?
4)If the cat converter is bad(but not plugged), and I continue to run the vehicle will it effect the engine performance, fuel economy, etc, or will I simply be an ecological Neanderthal -- there is no vehicle emissions testing in the rural area where I live, and with the holiday coming and other expenses (car insurance w/teen drivers, heating oil, HELP!), I'd prefer to delay changing it out until February or so.
5)I have located some "generic" (Schultz, Catco brand names) at reasonable prices, <$50, about $100 to $125 installed, and am wondering if any of you have any recommendations on whose replacement brand is best--or brands to avoid?

Thanks all, and have a safe holiday season

You could try switching the oxygen sensors closest to the cat, put the one that was after the cat before the cat, etc. The PCM does compare the average readings of the two oxygen sensors to determine cat efficiency and if one was reading rich or lean it could cause the problem

Thanks. Sorry for late reply. Busy with work, family etc. I swapped them and got the same results. The interesting thing is that all this happened after a cooling system problem i had. The truck wouldn't warm up properly and was running cold, so I purchased a new thermostat. Before I could put it the MIL came on with a P0118(Coolant Temp High) causing the MIL and the P0420 (Cat efficiency) code also set. COuld the overheat have somehow caused the cat to go bad? I figured it was just coincidence, but who knows.

Thanks again for the reply. New aftermarket cat going in next week.