I'm replacing my Cat. And my new one has a bung for the downstream o2 sensor. The problem is my stock Cat has a second sensor in the rear of the Cat and I'm not sure what it is or if it's even needed. It comes out with a 1/2" wrench.
Definettly looks like a temp probe. Dunno why it's there unless someone at sometime had a bear of a time diagnosing something or just really wanted to make sure his/her cat was working.
Did you know there's a factory recall on 1996 Cherokee XJ's for a catalytic converter replacement? If your interested just scroll down in this link and put in your VIN #.