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If you are ideling and you give it 3/4 to full throttal it lags and dies? My first thought was it floods is self out? Not exactly sure, would a simple tune up help? The motor has 200,000 miles on er! Also the previous owner told me that I need to take the cats off and put a performance muffler with 2.5" pipe to help it breath better... doesn't it need more backpressure?
If you give it gas and it lags and dies, you need a tune up. Old worn spark plugs will do this especially. Cap and rotor is cheap and always a good idea. If you haven't done this stuff, you should anyway, it's always a good idea, and helps you rule out the quick tune up stuff.. 200,000 is a healthy chunk of miles, but these engines are known to average around 300,000 or more. Some even into the 500,000 - 700,000 range when properly taken care of.
If those things don't work, my next guess would be a vacuum leak. If it has the original plastic vacuum lines, those things can start to get brittle and crack. When you throttle it, something might be getting an incorrect amount of vacuum and doesn't like it.
As for removing the cats, you'll have to check your local emissions laws. If you don't have any then yeah, you can always do that, every little bit helps. However, I would always advise against it, I'm a big personal fan of fresh clean air. 5 HP's never seemed like a good enough trade off. However, a good high flow cat and muffler would do it justice. As for diameter, 2.25" is what most go with. You could do a 2.5" if you're thinking about doing some performance mods to it, but most recommend against going any higher than that or you'll start losing performance.