Retarding the spark advance map will lower emssions for any engine, but I'm not sure exactly how to do it on the M104 since I'm not familiar with the M104's ignition system details.

The fact that you have measureable O2 indicates that either the catalyst is too cool or it may be degraded. If the cat is hot enough to operate at peak efficiency, the O2 readings should be 0.0%. The percent O2 is a diagnostic tool, and it's important to understand what it implies. If it's more than zero it means not all possible catalyst reactions are taking place.

Duke