They are part of a heat shield that is built into the muffler.

A lot of stock mufflers, including the ones on cars and trucks, have small holes in the bottom. They are water drains. Burning a gallon of gasoline produces over a gallon of water, believe it or not. That water condenses in cool exhaust pipes (startup or cold weather) and will cause rust. That's why exhaust pipes rust out from the inside. That's one of the reasons why starting the engine and letting it idle for a few minutes in winter isn't a good idea. Some of the water (remember, it's steam in the cylinder) gets past the rings and into the engine oil. The only way to get it out is to run the engine until it is completely warmed up - which also warms the exhaust and gets the water out of it.

Catalytic converters do two things. One, they "finish" burning unburned fuel, usually carbon monoxide into carbon dioxide. Two, they reduce nitrous oxides back into nitrogen and oxygen. They have no effect on the water or on the sulfur oxides.

Sulphur is present in almost all petroleum fuels, and most of it is refined out. The remainder turns into sulphur oxide (two forms, both gaseous). Some gets into the crankcase, where it will combine with any water present and form sulphurous or sulphuric acid. Oil has some alkali in it to counter this (and other) acids. The majority goes out the exhaust pipe, unless liquid water is present (cold pipe), in which case some combines with the water and forms acid. As a matter of interest,  carbon dioxide also combines with liquid water, forming carbonic acid, also corrosive. Carbonic acid is present in all carbonated beverages.

That water is formed when gasoline is burned in air is beyond dispute. Gasoline is a hydrocarbon, meaning it consists of hydrogen and carbon. When completely burned in air (actually, oxygen) it produces oxides of hydrogen and carbon - specifically, water and carbon dioxide. Temperatures in the engine sylinder are high enough that the water remains vaporized - steam. When that steam hits a cold exhaust system, it condenses into liquid water. Observe the exhaust pipe of a car (with or without a catalytic converter) on a cold day and see the water dripping out. Ever wonder where it came from? Now you know.

I noticed a couple of days ago that my stock muffler is leaking in the exact same place you described. I feel a fair amount of air coming from the hole area, Not the pipe joint.
I too thought it was coming from the pipe joint and i replaced the soft seal where the 2 slide together, No change at all.. I'm looking into a new muffler now..
Mines a 05, S-40 with 3600 miles on it..