If the problem is really as localized as it sounds, consider ordering just new gaskets and bolts, and taking it to a welding shop for repair. You may get several more years out of it.

I would be concerned that the induction system might get 'confused' with different backpressure characteristics if you removed the muffler, though I do not really know. Car would probably be louder too.

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1986 300E 5-Speed 240k mi.