A couple of thoughts on why your stat settings have to be so high to keep an active cat.
1) Have you verified that the knob is on tight and right? When you turn the knob all the way up it should stop spinning and be pointing straight to the floor. Check that and tell us what you find.
2) Your wet wood. A normal catalyst will only be able to burn smoke, and stay active, when it is being fed 500 degree smoke. If your fire is a cold, hissing, slobbery, mess then the only way it will make 500 degree smoke is if you feed it significant air which is only done at higher stat settings. We've all sat around a campfire made with wet wood. It doesn't make much heat until it gets big.
3) As catalytic combustors get old and wear out, or lose effectiveness from poison, they stop working at low temperatures. Like they need to be at 700 vs. 500 to create the reaction. New cats in new BKs have a 10 year warranty but I still expect no more than 5 years before replacement to keep things working nicely. We don't really know how old your cat is or whether it was partially poisoned.
4) Your fire. We haven't seen your wood or the way you load this thing. The king can be filled to the top with small splits of wood. In your shoes I would be splitting small, like 3-5 inches across the longest dimension, and loading loosely to the top. Load straight in so that when you look in the window you see the butt ends of the splits, we call this north/south loading.
5) Your weakfish draft. Since your chimney is less than ideal it doesn't suck as much air through the little opening in the stat. To overcome this, you need a more open stat to get the same amount of air to the stove. Setting 2 is right in the middle so you still have lots of effective range either way. It's not a bad place to run the stove. When your stove was new it was only required to have 12 feet of chimney. You meet the minimum spec so don't worry about this. Just know that you're on the bottom end so you will probably never be able to run below the gold "normal" range which I believe ends at 1.75 or so.