Determine which O2 sensor to replace.

Many o2 sensors have gone bad but 50% of the time when a code is set on a car about an o2 sensor there is another cause which is changing the emissions & setting the o2 code (ex. vacuum leak, bad plug, injector, it could very well be the cat etc.) The root cause of the problem must be found NOT JUST READING CODES! TAKE YOUR CAR ELSWHERE.

I would start with the free stuff check all your vaccum lines for breaks or leaks that will trick your engine computer into thinking the cat efficency is below specs. if that dosent work theres a company that makes a addive called cataclean follow the instructions it works wonders for cars that drive fine but have a cat code. if that dosent work i would personally take it to a garage and have them do a smoke test or determine weather your cat is in need of replacement.

What about new spark plugs and wires?

Don't be presumptuous, replace the EGR valve and put your cat back together. Losing power on am incline/hill means but one thing, the Exhaust Gas Recirculation valve is bad.

Yes, I would say that on an OBD-II system on a car 1996 and up it should be able to detect which Oxygen sensor is faulty or giving a false signal, or with a little bit of diagnostic time determine if the catalytic converter is plugged or not functioning using a sniffer.

there are more then 1 o2 sensor find out if is a upstream or downstream sensor before installing remove the battery cable this will reset the computer

Just had one of these with a maxima, the code is multiple random misfire, when a misfire occurs, to start is do the basics, replace the plugs, check fuel pressure, clean throttle body, and coolant is topped up. also I have seen if the O2 sensor is not working correctly is can cause a misfire, you will need a scan tool to look at what the O2 sensor is doing, o rby back probing the sensor (don't damage the O2 sensor wires). If it wires replace them as well, if it has coils they usually dont give that code if one fails, it will pinpoint that a certain coil if one fals.

CA cars are differnet from any other states cars. from a standpoint of emissions.

i would do what the dealer is suggesting

Yess bad EGR valve

It can be hard to say which it is, because either one will trip the the code, but in this case I'd place my bet on it being the O2 sensor because it says "warm up" - the O2 sensor has to be up to temperature (around 900 degrees) to function. The computer watches for the O2 sensor to heat up in a certain amount of time, and if it doesn't get to temperature soon enough, the computer diagnoses a faulty heater for the O2 sensor and trips the code.

For the record, this would be the secondary O2 sensor, the one after the cat. That's the one that is used to determine cat functionality and efficiency. The primary sensor, before the cat, is used to fine-tune the fuel delivery.