Man, this brings back memories of a Peugeot I wrestled with for weeks. Same exact thing, the hanger read straight on the tool but the shifting was still junk in the middle of the cassette. I finally got smart and checked the dropout faces with a straight edge and sure enough the drive side was tweaked from some old crash damage. Once I cold set it back in line the whole drivetrain woke up. Now I check dropout alignment first on every old steel frame before I even touch the hanger tool. It saves so much time and guessing. Those old frames take a beating over 30 plus years and the dropouts get twisted way more often than people realize. Good call figuring that out on your own.

Stage 3 decline means you're basically paying to keep a dead tree standing. Once you're seeing bark splitting and D shaped exit holes up the trunk, the tree is done and injections just buy you a year or two before it drops a limb on something. Best money spent is a removal quote and a chainsaw, not another $200 treatment. Had one let go in a storm two summers back and took out a fence plus half a garage, and the homeowner had been paying for shots the whole time.