The way OBD II works is by taking a reading before the cat and after the cat. You will need to put the O2 sensors like that.

I'm not sure what you mean by "it has a bung in the right cylinder pipe"? Is that for an EGT sensor possibly? Either way, you will need an O2 before the cat, and one after the cat. It may be best to take the cat to a muffler shop and have them weld it, that way you don't screw up a $200 cat converter.