#2 is the correct wire ... you want the reading after the cat because of the signal the O2 sensor is sending.
I'm not going to get into it, but the sensor before the cat is giving a more erractic reading making it not good for the a/f gauge. There's a technical sheet on it but I really don't feel like getting it. Just take my word for it.
Why yours won't work when you put it to that one, I have know idea ?????