To be honest, Cat's are often the most forgotten thing to check in this day and age, no thanks to OBD, and many technicians rely on this to know if a cat is bad or not. theres' really only 3 reasons for a cat to go out.
*Missfires/excessive unburned fuel causing them to overheat and break.
*Manufacturer Defect causing them to prematurely fail
*Improper cat type/size/location causing premature failure
The problem with this cat is either:
a) the tune didn't notify him of the failure due to cel suppresion
b) the cat was after the rear oxygen sensor anyways, so the DME would not have been able to measure and notify shadow/technician of the failure anyways, so the mechanics never looked at it.
c) you have either an excessively rich tune, had a misfire you didn't notice causing damage and it just kept getting worse, slowly causing running issues (as you stated) and never being noticed due to either a) or b).
I've seen cats so bad a car won't run. IF you do a compression test it'll show zero or near zero because of a completely clogged cart. (i.e, if no air can escape, no air can enter which would prevent compression from building.
It's funny, because I've had engines not run from a bad cat, and you take out the primary oxygen sensor, there'd be JUST enough exhaust flow for the engine to start..
Probably the reason the valve stem seals blew, i'm curious if it was the exhaust side or he intake side of the seals that went.
Either way, i'm in no way blaming any one company, nor faulting, blaming, or anything of the sort to shadow or his technicians. More of just rambling with random info.
either way, sorry to head about he motor.