3. cut the affected section out and bolt in a new section or replace with a downpipe-straight pipe exhaust.
Any muffler shop should be able to do any of these. If you want to increase your turbo efficiency, using a new downpipe will help. 3 bolts at the turbo housing and you can replace the whole exhaust. However, if you have emisions inspections you will fail due to lack of cat. Some places also require a muffler too. I would get a muffler just because a good muffler really quiets the exhaust without reducing flow very much. No muffler-cat can also cause a booming/ringging resonation in the exhaust.
You can use band clamps. I would rather cut out the rusty section and weld in new piping.
Again, if you have emissions inspections, you should leave the cat in place or replace it. Many people replace it with a "straight pipe" from the turbo to the muffler. It improves turbo efficiency and is a lot cheaper than buying an OEM catalytic converter (diesel specific).
Don't try to hollow the cat out and reuse it because it'll give worse performance than a straight pipe due to air turbulence. I've heard of people cutting it out and welding it the outside of a straight pipe to give the apperance of a cat. This will pass a visual inspection but it can cause problems with a emissions test.
You would be surprised how cheap it would be to just have them cut the rusted section off and weld in a straight pipe. If the muffler's okay then leave it, if it's rusted, you can do a mufflerectomy. The exhuast sound isn't too bad because the turbo muffles the sound quite a bit.
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