2.25" would definitely give the Bluey a better flow (have a look under the car at the 90 degrees bend).
Also, for $350, which muffler are they supplying? Do you want max flow and not care how loud it is or you want a slightly restrictive, but quieter muffler.
Have a search on Autospeed website, have a look for giant mufflers. That will give you a good starting point.
I supplied a second hand commodore cat (around $50), a R33 muffler (around $60) and the piping and labour works out to about $190ish.