Likely caused by the additional 2 clicks in the AFM and the recirculating of exhaust gases into the intake. Also, if you have a high flow cat, it may not get hot enough to burn the HC's and CO's under test conditions, the baffle that emsvitil posted will slow the gas flow down, allowing the cat to burn hotter.
I think those that stripe the emission stuff, usually fall into one of two camps, "it robs HP", or "too cheap to replace it when it parts fail", the second I understand, if you don't have to pass a test every other year or so why would you spend a couple hundred on replacement parts or hours chasing down a problem. However, what most people forget is that unlike the engines of the mid to late '60's, where smog equipment was just slapped on to meet the newly introduced emission standards, engines since then have been designed along with the emission equipment, and simply deleting the equipment without correcting for it, usually ends up having a negative effect on performance.
Strangely though on the pass before that failed, I did have the afm set at 2 clicks. On this run as well I did much more of a warmup, driving around for 30 minutes or so to try to get the cat hot. It is a high flow cat. Even though HC and CO were three times higher than previous passes they are still only 10% of the allowed limit. Very low and I am not concerned about it at all.
I can understand not wanting to replace a $200 valve if you don't have to. But, I bet if you just yank it off every 50k miles and clean it the valve will last forever.
I wonder if there is any long-term danger to running without the EGR. Like you said, Toyota likely designed this as part of a system, they didn't just slap the EGR on there to get through emissions.
I've been reading a bit about EGR, and it seems it can actually increase power. It requires the throttle to be slightly more open for a given power output, which can make the throttle operate more efficiently. Also, the reduced cylinder temps can reduce the amount of heat soak happening, increasing efficiency by having more heat go into forward motion rather than absorbed into the cylinder walls. Interesting stuff (to me at least, haha.)
Anyway my butt dyno confirms no ill effects of a functional EGR.
