Update: Thanks to all your inputs guys. I did all of the above mentioned steps (got close to getting a ticket!) but car still failed. I finally had it diagnosed and the techs suggested a cat change. Yep...ouch $$$$ is the proper word. I went ahead with it because after searching through the glove compartment, I found out the car had rough idle due to leaky valve seals. The car has 170K mi so the cat is probably gone. All in all, I'm still happy with the car. It's my daily driver, gets me around in comfort, and is comparable if not cheaper in price compared to some of the used Hondas or Toyotas. Now I'm really ready to play and start tweaking it ( I used to tweak Mustangs).
Next stop is that R16 resistor that is said to adjust timing. I looked at it and it looks relatively easy to solder new resistors from Radio Shack and have a complete set of say -- 1 up and 1 down. I'll keep you guys posted. Happy driving---or MBZing!