First, thanks for the writeup/pics! We need more people like you around here!
Small point, you didn't need to drop the rest of the exhaust, you should have been able to let it droop down, or move it laterally enough to get the cat out. but it's easy enough to do and does free up space.
The JB4 will not eliminate the code. It will block the CEL from coming on, but the cat readiness monitor will still be incomplete (or failed without the resulting CEL).
This has been an issue with all N55s, since, (and you're in luck), until VERY recently, no o2 simulator or DP fix was available.
Looks like someone finally got an o2 simulator working...
http://e84.xbimmers.com/forums/showthread.php?t=1219459
Without using that, while you won't have a CEL, you will not be able to pass inspection with the DP in place.
That being said, you NEED a JB4, pronto!
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'02 S54 M3 (500/500 GC/Koni)
'08 N54 135 (JB4, DCI, BMW PS/Bilstein B6s, H&R M3 FSB, Strongflex FCABs)
'14 N55 X1 (JB4, BMS DP, BMS Intake, Alpina TCU reflash, H&R Sports, Bilstein B6s, E93 M3 RSB, Strongflex FCABs, baby seat)
'08 N54 535xi touring (Bilstein B6s, Downpipes, MHD tune, baby seat)