The signal from the O2 sensor not swinging up and down with the coding plug in that configuration indicates that the LH computer is not adjusting the fuel mixture based on any feedback. The mixture would then be controlled by the mapping based on the signal from the MAF sensor and the engine speed.

Full throttle performance should be the same with the coding plug in either configuration, because the O2 sensor signal is ignored by the LH computer at full throttle, even if the coding plug is in the normal US configuration. You have to keep in mind that the stored maps are only approximations, as are any aftermarket chips. They have to be because there are way to many variables for the mapping to be perfect. Even if absolutely all environmental and fuel conditions were exactly the same, there is still variation from one engine to the next, even in completely stock form. Some systems even allow for adjustment for variations between the different cylinders in the same engine. The mapping has to take into account the possibility of these variables, so it's kind of generalized to work pretty well for the most part, but it's still a compromise to at least some extent.

The mixture adjustment based on the O2 sensor feedback fine tunes those general maps to the specific conditions that are present. In the days before interactive mixture control, cars were only capable of being manufactured with the approximated tuning. You got a carburetor with a certain size jets in it, and that was all you had, no matter what the weather, fuel quality, load in the car, or where you were driving it. For the safely of the engine, richer was better, so that's how most were probably produced. This doesn't mean that one fixed configuration, that's maybe a little on the rich side, is better in all circumstances though. It makes for more pollution, lower fuel economy, and increased carbon and other things being formed in the engine from imperfect combustion. This is one reason that engines last longer than they used to, and oil change intervals are longer than they used to be.

More efficient continual tuning makes for more efficient complete combustion, and less undesirable byproducts from any more imperfect combustion. Engines run much cleaner now because they are continually being tuned by the engine management system for the specific car and current conditions. The systems aren't able to use the feedback for tuning at full throttle because things are happening too fast. Engine damage may already be occurring by the time a signal from the O2 sensor is received and the mixture is adjusted based on it. Even if it was fast enough, the O2 sensors used in our cars are only really accurate near the 14.7:1 chemically idea fuel mixture. Accurate feedback at the fuel mixture required for maximum power would require a wide band O2 sensor, and those aren't cheap. At some point in the future a system that uses feedback of some kind will end up being used for full throttle operation too though.

Short answer is that I'd let the O2 sensor and LH take care of things at part throttle, and tune it yourself at full throttle with something like an adjustable fuel pressure regulator or piggyback computer. Those are the same things that you'd have to do with the coding plug in the "no cats" mode anyway.

Mike Schmidt
'88 928S4 Auto Black/Black "PORSCHE" cloth