The sheet metal extension that runs from the lower rear of my early B to inside the rear bumper. It has a rubber seal that contacts the bumper. Keep out road dirt, reduce noise? I am thinking about trimming this piece off and smoothing where it's welded on. Bad idea?

I would say bad idea. It controls air flow and without it the rear of your car would be dirty all the time. Kinda like the old station wagons and vans.