Yes, it does sound better, but I'm running 5" pipe with 6" tip. I had it dump just behind the cab, when I use my a/c and windows up it got a little too loud of a drone noise under hard accleration. So I added about 3ft of 5" pipe to have the tip dropped just behind the rear axle. Literally have an 1.5 in between axle and tip. Enough room for play, and won't burn fliud in axle, or won't burn brake lines. The way I have it set up, sounds badass. As the legality I am not sure. I know California has not cracked down on diesels yet. If you are not sure check with somone who lives in the same state as you on this forum. Or you could open a new thread asking. Could also have a metal fab shop, or muffler shop build you a dummy cat. When Cali cracks down on diesels that is what I am going to do. Crap sorry this so long.
YOu shouldent loose any power removing the muffler, the turbo creates all the back pressure and more that the engine could ever need. Now if your CEL is on due to the exhaust, you could be loosing some power! Between a straight through aftermarket muffler and a straight pipe there really isnt much flow difference, if any.
My son and I replaced the muffler on his 03 with a straight pipe. No loss of power. Sounds great and seems to have more low end and high end power. Revs quicker too. We are doing the same to my 06 this week.