98 Z3 2.8L poor power

[kingskid]

I have a 1998 BMW Z3 with a 2.8 L engine. I am traveling across the US and in Boise Id right now. The car has been performing poorly and may be getting worse as I travel. It drives ok if I am maintaining a steady speed (even freeway speeds) but when I climb hills or as I accelerate away from a stop sign it does not have much power. The power curve seems really flat. On some hills I have to gear down to 3rd gear.

Two things have happened to the car that one of which I think may have caused this:

1. The day before I left home my mechanic updated the engine management software. He said a new version was available from BMW. Perhaps something is wrong with the software.

2. On the first day out on the trip I hit a rock and dented the Catalytic Converter. The dent goes in about an inch on the side of the converter. Could something be partially blocking the exhaust or be loose inside?

Any Help or advice would be appreciated.

[JimC-NH]

Classic symptoms of a clogged catalytic converter. If the engine was running fine before the cat was damaged, then it probably eliminates the software upgrade.

Give the exhaust system a good shake. The catalytic converter should not rattle as if it is full of pieces. I suspect the impact damaged the cat. Sorry - it is the more expensive of the two.
The absolute test is to have a mechanic pull the precat O2 sensor and install a pressure gauge, and see if the back pressure is high, or builds up.

[Bmwcat]

I'd have that software checked, too. Sounds suspicious, the day before you left?
Check your air filter and spark plugs too.. 2.8L plugs dont last more than 10K miles from my experience. ;)