Power seems to run out early running through the gears and there is a hollow sound in the exhaust at the end

the bigger tyres the more power it takes to turn them
You have very big tyres so suffer a loss of power
with extra power and the oil pressure falling, I would suspect worn big ends and main bearings especially with the smoking exhaust as under load of acceleration the extra clearance in the bearings is allowing extra oil onto the cylinders and the oil rings cannot cope.
exhaust system has no effect

sounds like auto matic choke problem try a manual choke

YES, the emissions will be effected, you are driving "without" a converter. The computer was programmed to have all sensors work together so the emissions run clean. The oxygen sensors are sending signals to the pc about unclean emissions due to that converter.

It is very likely the exhaust system doing this, put it on a car lift and check for the noise.

Stock pipes (debaffled) & stock airbox:
128 or 130 main, 30 or 32.5 pilot jet, dyno spring, dyno needle on 3rd notch, mix screw at 2.5 - 3 turns. Adjust idle knob as needed to reach 1100 rpm.

Check the spark plugs.

bad fuel bad filter air or fuel

or a bad oor loose govener

the reason it might be shifting so early is because of the gear ratio in the rear end of the truck. it is common in the 2 wheel drive basic model pickup because they were designed to work not travel.

The Timing Belt runs from the Crankshaft of the engine.
In turn, it goes around the Camshaft gear, or gears.

The Camshaft opens the Valves in the Cylinder Head.

These valves open to bring in the air/fuel mixture, (Intake Valve/s), and let out the Exhaust.
(Exhaust valves)

These must be done in a precise fashion.

If the Intake valve closes too late, you will lose compression, hence power.
If the Exhaust valve opens too early, you will early you will lose power.

When a timing belt stretches due to wear, it allows the above conditions to happen.

(The Timing Belt has teeth on the inside of it. These teeth match notches on the timing gears. One gear for the Camshaft, or Each camshaft, and one for the Crankshaft.

The teeth wear down, and the belt also stretches. All it takes, is a discrepancy of a few thousandths of an inch.

An average human hair is .003 thick. Three thousandths.
60 thousandths stretch of the belt will cause these problems. 60 thousandths is approximately 1/16th of an inch)

This animation may help to explain how your Four Stroke engine in your Volkswagon works. This way you can see the Cylinder Head, Camshaft, Crankshaft, and Valves that I have been referring to,

http://www.howstuffworks.com/engine1.htm

Doesn't show the Timing gears, or timing belt.
The animation at the top right of the page, shows an engine with dual overhead camshafts.

Two camshafts.

This shows how a timing belt is incorporated,

http://www.samarins.com/glossary/timing_belt.html

Yes, if the timing belt is known to be bad, this will definitely cause a power problem.

A clogged Catalytic Converter will also.
There are pellets inside a catalytic converter.
These pellets would remind you of small peas.

Over time they break down, and form clumps. The clumps can restrict the exhaust gases from escaping out of the catalytic converter, and cause back pressure.

This will rob the vehicle of power. After time the restriction may be so great, that no exhaust gases will be allowed to escape, and the vehicle will not run.

seems like somethjing foreign could have been forgotten in the transfer case. this most likely is causing the rattle, when the viberation from the motor reaches a certain pitch or frequency.. best to have it checked by a pro...