I don't have any personal experience with Ketones, but from what I've read, they are nasty and really require getting flushed out at the vet. Since your vet sort of recommended this, but was not sounding urgent about it, maybe it's worth another phone call? Hopefully by my responding, it will re-kick this message back to the top and someone who has experience can comment.
As far as the food, I assume you've raised up the food dish to chest level so baby doesn't need to bend over for it? And maybe using a small plate instead of a bowl? And, I assume you are feeding a low carb, non-grain food so it doesn't spike the blood sugars?
I hear you on increasing the dosage. Originally, that's what my vet wanted me to try. However, thanks to this group, I learned that what I really needed to do is back down the dosage by .25 instead of increasing it. That lasted a few days and then I had to back it down another .25 units. Then, my girl finally regulated. Now the vet's happy with me. Go figure. So, maybe you are in the same boat if you are getting those big bounces. Did you post your numbers for the experts here to comment? If you wish to do so, you might what to start a new post asking for numbers help.
As far as B12, a very informative link for you on the dosing and types:
http://www.felinecrf.org/vitamin_b.htm#methylcobalamin
Regarding your decision, only you can decide when it's time. It all boils down to quality of life, and sometimes, that means the parent's quality of life also. If your kitty doesn't seem to be in pain, you can afford getting the ketones flushed, and you have the energy and desire to try, then proceed, yes?
However, if you feel in your heart that it is time to say goodbye, then I know there is no one here who would fault you on that decision. I can only dream that my kitty will live 19 long, wonderful years. Obviously, you've done an incredible job taking care of your baby.
Here is a good link for you to peruse. It might help you make that difficult decision, or at least help you prepare for that day if it ends up being in the far future:
http://www.felinecrf.org/saying_goodbye.htm
Hugs, DZ and Sarah