There are two mufflers in your exhaust, the back box and one behind the cat. I believe the wadding could be from either of them. The back box will definitely have it in but i'm not sure about the forward one. Some cars only have baffles (no wadding) in exhaust boxes so close to the cat'. Either way I would be replacing the whole system from the back of the cat'. It's only a small system so won't cost much. I do all jobs on all of my vehicles (servicing to engine rebuilds) but even I don't bother with exhausts as they're a faff without a ramp and so cheap to have fitted that you don't save enough money to justify the effort.