No, higher octane means that it resists detonation better by slowing the flame front in the combustion chamber. If your car doesn’t have high compression/boost/advanced timing,etc, you’re not gonna benefit from it and will actually probably make less power, lower fuel economy, more pollution, less cash in your wallet from the unburnt fuel.
Regarding O2 sensors, does you car have a front and rear sensor? The front sensor upstream of the catalyctic converters is what the ECU uses for AFR. The second O2 sensor by the cat is purely for emmisions purpose. Those are commonly turned off to avoid codes when running a catless/high-flow cat in non-stock location and has no effect on actual engine performance.
Is it possible that your cats honeycomb broke off and is sitting sideways restricting your exhaust? That would cause a lost of MPGs.