This is my 85 LX 5.0 it has MAC shorty headers but not sure what the cat pipe is. I am thinking about getting the MAC catback 2 1/2" with 3 1/2" tips. Also wondering about running with cats or without. Sorry about the pics but the best I can do with the car stored for the winter.
Looks like stock mid-pipe to me. Up to you if you want to run catless or not. There are pros and cons to both. Ultimately it depends on what you aspire the car to be.
Butch, if you live in a smog state, removing the cats and smog equipment can make it tough on inspections and resale. That being said, I've removed the smog equipment on every mustang I've owned, except my wife's V6 2013 but I live in a state with no inspection. Know that if you take off the cats, there is no reason to have the smog pump, TAD & TAB sensors, or thermactor hoses and tube. Your car will throw off codes but no CEL. Some people do have problems with strong exhaust smell afterwards but you can tune it. Do not leave your cats on if you remove the smog pump or your cats will eventually clog. You can replace the smog pump with a delete pulley or just run a shorter belt.
If you can afford stainless steel, go for it as it lasts much longer than aluminized pipe and doesn't rust out as fast.
Most guys go with aftermarket headers, an H or X pipe, and a good cat back. Popular brands are flowmaster, Dynomax, MAC, BBK, for exhaust.
For headers, the best shorty headers are Ford Ceramic coated. For the best performance, go with long tube headers as shorty headers offer very little in the way of actual HP gains- they make different LT ones for auto vs. stick. I prefer the BBK or Kooks.
Mufflers- depending on how loud you want.. Flowmaster 50's are quite, 40 series louder. Dynomax are a good brand that dont't have the drone. I personally like to be different and really like MAC flowpath SS mufflers. They sound great and are very well made.
Figure on spending anywhere from 5-700 for a good new exhaust, or scrounge around on the boards and CL for good buys on used parts.