A "worn out" converter won't be hollow. Hollow converters are those that have been modified with the internals deliberately removed. A "worn out" converter would generally affect engine performance and exhaust flow to such a degree that it would require complete ignorance on the part of the driver - or a willingness to drive despite the horrible, horrible rotten egg smell permeating the entire vehicle.
It is true that converter performance can degrade over time, especially the older designs, but for the most part, converters last the life of a vehicle if the other emissions systems are kept in good shape, and there is never a lean/rich fuel condition or anything leaked into the exhaust stream to affect the materials inside the converter.
It is 100% legal to replace a catalytic converter that isn't working properly, and it is also 100% legal to replace the converter in an older vehicle with a newer, better one.
I'm not sure what you're asking for in terms of links to passenger health. The chemistry of internal combustion engines and their exhaust is well understood -
http://en.wikipedia.org/wiki/Exhaust_gas. Unconverted exhaust gas contains carbon monoxide - a deadly, poisonous gas. Yes, it is detrimental to the environment, but it's even more detrimental to the human body.
Modern conveters also don't reduce exhaust flow that much, if at all. In fact, vehicles like the Explorer were designed with the catalytic converter as part of the system, so removing the converter actually has a negative effect on exhaust flow and fuel economy. Vehicles that generate 800+ HP might see a restriction from a converter, but the 160+ HP engine in the Explorer, and those in even the newest vehicles, don't see any real peformance hit from a properly working catalytic converter, however old.
Money rules, alright. The money not spent on a catalytic converter can be used instead to help pay the
$25,000 per day penalty (up to $200,000) along with selling the Explorer and everything else you own!
There's just no reason to do this. It's based on an old practice from the days of muscle cars, when converters were new, regulations were lax, and ignorance was widespread.
These days, vehicles drive better with the converter and emissions in place, and for a small price, you can have better performance, better mileage, and better health - and avoid a fine of a magnitude that can ruin your life.