YOu can install two mufflers typically (consult with local/state Johnny Law before attempting this tho) as long as you have a cat. converter for each pipe. Modern engines do need certain things, but the modification of dual exhaust will not (I've NEVER seen a vehicle not run right after doing this) cause any problems.
I know that in virginia if your vehicle came with two cat. converters you COULDN'T go to a single cat. setup, but if it had one cat you could go to two. Thing is, for emmissions purposes, you will need to place both cat. converters close to the engine so they get up to proper tempature. It took me three trys on my Z-28 to place the cat's just right (because there wasn't anywhere to tuck them in on my Z-28 and it sat so low I was really restricted on placement).
Got Mud?, you have four O2 sensors because your computer is an ODB2 setup. ODB2 is great because its the first "smart" computer system car makes have used, however its bad because you do have to have four O2 sensors and it can be a little tempramental at times (read: my Z-28)

:. The front sensor measures the fuel/air ratio before the cat. converter, and the second one (behind the cat) measures what the fuel/air ratio is after the cat. converter. The computer then compares the two and desides if any changes to your fuel injectors is needed (either more or less fuel to achieve the ideal air/fuel ratio). If you hollow out your cats, or modify your exhaust radically I would recommend getting "02 SIMMS". They are used primarily (and I believe designed by) the Camaro/Firebird guys. As ODB2 was (and may still be) a GM only computer setup. Any Camaro/Firebird website (www.camaroz28.com) that has a forum will have topics concerning how to purchase these items and how to install them, or you could probably do a search thru Yahoo, AJ, etc... for "O2 SIMMS". What they do is plug into your second set of O2 Sensor wireing (you can remove the second set of O2 sensors if you want to) and fool the computer into thinking the cat. converters are working JUST as they should be (i.e. perfectly) and keep the computer happy. Tho if you have to take the "sniffer" test I would keep your O2 sensors in place and rehook the second set up before taking the test.
If you need any help finding/installing those let me know, I had a set on my '96 Z-28.
-Chris