For treats I use any freezed dried meat. Chicken is very popular with my group. I also give them dried rabbit ears, they love to chew on them and also play with it.
For the bad breath are your cat's teeth and mouth clean? Tartar buildup? I have been using plaqueoff and have seen big improvements in tartar and smell both with cats and dogs. But if the smell is truly horrendous maybe a vet visit might be in order to see if a tooth has gone bad or something.
I tried the dm at first but switched to canned only for the diabetic and I am trying to pass it on the healthy kitties but one cat suffers terrible belching with a bad odor when he eats it.