From my experience with motors in general... not Zuks in general... and I have a lot... trust me.
You don't need the cat.. but there are stiff fines in most states if you plan to street it... not sure about the laws for trail rigs..
but to answer your question.. you won't hurt a thing. Engines don't like to have to breath through cats.. performance gains will be minimal, and don't go too big with your exhaust, these little engines DO like some back pressure, but a full length exhaust with a decent muffler will be fine.
It is very possible that your catalyst has collasped, I have had that happen several times on several cars, and seen it on many many more. if you can remove it, you can sometimes ram a pry bar down in there, break up the honey comb and get it out and just run the shell... but it's a pain...
I had that dilemma this week too, my down pipe on my tracky was toast... and all the muffler thief shops wanted $400 plus for the part.. so I was going headers to custom exhaust with universal converter.. but I found a Magnaflow downpipe/converter on Ebay for $150... so I ordered it.. AutoZone has them for $137.. I trust the Magnflow name... but to be honest, they are probably equal... I decided against the header... I hate header leaks... but now, am second guessing my decision... lol... but it's done. I won't change it at this point....