There's definitely something wrong - 20.8% oxygen is the normal amount of oxygen present in air. Exhaust from an engine should definitely contain less than this, because the engine uses quite a bit of oxygen to burn fuel.

Perhaps the test rig was screwed up? You'd need a hell of an exhaust leak to pass almost no exhaust gas through the tailpipe - and they probably check for a pressurized exhaust during the inspection.

Troy
1995 E420 90k