The mikuni carbs are crap. Id say rebuild it and replace/check all vacume lines. Make sure everything goes to the right place and all.

I also liked your idea of a more modern cat.

88 Montero, StarQuest turbo, Kormex 5speed +tuff-pan w/phoenix f. stage2 clutch, 4in lift+33' tires, 4.875 lsd, short-throw shifter, Aisin hubs, SR big brakes, gen2 uca's, elantra alt, and so much more... 16g turbo w/hardpipes + 4.90 locking disk-brake axle soon (maybe lsd or aussie front??)