2000 Miata P0420 questions

I have a 2000 Miata that I purchesed from an individual in October. Shortly after getting it home (2 hour drive) the check engine light came on. I went to Autozone and had the code checked and it came up P0420. After doing some research I am trying to diagnose whether it is the cat or the O2 sensor. Since Autozone only reads the codes I purchased an EZ SCAN 4000 AUTOXRAY OBD II SCAN TOOL (great tool by the way) to do some more thorough testing.

A little history on the car. Has 125000 miles, has been serviced regulary and all fluids are synthetic. The previous owner has installed an AEM intake with K&N filter, Magnecor Performance ign. coil and wires, and a Catback dual exhaust system. It runs fine and there are no vacuum leaks that I can find. I have read that if oil gets on the cat that it can damage it and am wondering if the K&N filter oil may have attributed to its demise. I also noticed that theses cars have had problems with the coils, which can also lead to cat damage. I am thinking that may be why the coils were replaced in the first place. All this was done before I purchased it so these are just assumptions.

In closed loop O2 sensor # 1 fluctuates between .110v -.725v and O2 sensor #2 is at 0volts. After vehicle is warmed up and running in closed loop Sens #1 fluctuates between .90v - .810v and sens #2 fluctuates between .80v - .800v (give or take). The # 2 sensor is fluctuating at right about the same voltage as as #1 and at the same rate. #2 follows #1 milliseconds after #1 and within 10-20% of #1 readings. I believe that this is indicating the cat is bad and not cleaning the exhaust because #2 is fluctuating so much, so quick, so often. I believe the voltage readings should be lower(because the ex gases are cleaner) and the fluctuations should be less often. If the cat was good the readings would be different between #1 & #2 and #2 would not fluctuate near as much.

Any input in this matter is appreciated as I don't want to start throwing money at it replacing unneeded items.

Thanks in advance

that is most definitly a bad cat. sorry.

the post cat o2 should remain pretty much stable around .330 or so

My friend has a 2000 Miata that was making loud screeching noises when he first started the engine with the air running. Now it just runs hot if you run the air. Lately I checked and the check engine lights up immediately and it starts to run hot. I'm wondering if maybe he overdid it the last time he tried to drive it. I bought the gasket and thermostat, but might be too late to try the small things. What do you think?

The down stream HO2 sensor told the ECU, that your cat is gone!
see, http://www.catalyticconverterwarehouse.com
Give your car a good tune up, befor replacing the catalytic converter.

Spark plugs, Air filter, Fuel filter, clean throttle body, clean MAF sensor, and a New upstream H02 sensor.