Intermittent P0420 OBDII Code - What Should O2 Sensors Be Doing?

Have been troubleshooting the subject intermitttent OBDII code on my 97 Taurus 3.0 GL Vulcan with an AutoXRay reader.
While monitoring with the reader over the last 2 days, I have had the code
come in once or twice (low cat efficiency bank 1) and on subsequent scans after resetting, its not there. I have had this code come and go, eventually resetting itself within OBD on its own, for about a year now.
In the real time data monitoring mode, both the Bank 1 O2 Sensor 1 and Sensor 2 voltages are all over the map, between 0 mv and around 900 mv.
Same thing is true on the Bank 2 O2 sensor outputs. However, I have never gotten a low cat efficiency code from Bank 2.
From what I have read, the upstream sensor voltage should be varying, as observed, while the downstream sensor voltage should be low and steady. Having both vary would indiacte that cat efficiency was indeed low. If thats true, why doesn't the Bank 2 fault code ever show up?
Does OBD II average the voltages of the two sensors 1 and 2 over a period of time before it compares them to calculate cat efficiency? I am wondering if the P0420 code is being generated intermittently if the upstream Bank 1 sensor goes to a low voltage, simultaneously when the downstream sensor is at a slightly higher voltage. Maybe the code is a result of a 'sluggish" downstream sensor?
Should I be replacing the downstream sensor on Bank 1? Which bank is Bank 1 on the 3.0 in the Taurus, from the forward cyclinders, or the aft? Defineitly want to be sure the sensors are Ok before I have to spring for that big bucks ford Y pipe with both cats. Car has 118K on it, otherwise rnning well. It may have a slight head gasket coolant leak, as I periodically need to top up the expansion tank, with no evidence of external leakage. No indicaton of coolant in the oil or tranny fluid either.
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A properly functioning catalytic convertor will store oxygen, eventually, it will become saturated with oxygen and burp some off. Normal would be to see the upstream O2 sensors varying between 100mv and 900mv and the downstream sensors hanging fairly high except for once the cat becomes saturated and burps off oxygen at which time the downstream o2 sensor(s) would read low. There is no defined -correct- post cat O2 sensor voltage per-say, but it's cycling should be much slower than the pre-cat O2 sensors.
The PCM basically compares the frequency of the rich/lean-lean/rich cycles between the upstream and downstream sensors.
If both upstream and downstream O2 sensors are varying as you say, it appears that the catalytic convertors are no longer functioning within the OBD2 criteria, not surprising on a vehicle with 118K miles on it. Coolant entering the exhaust system hasn't helped matters.
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