From looking at the screenshot again, it looks as though the GPU died right before you took the screenshot, correct? The screenshot was taken at 19:24 and cgminer shows:
[2013-06-06 19:23:44] Failed to reinit GPU thread 1
...
[2013-06-06 19:24:46] Thread 1 no longer exists
[2013-06-06 19:24:46] Error -6: Creating Comamnd Queue. (clCreateCommandQueue)
[2013-06-06 19:24:46] Failed to reinit GPU thread 1
So unless there is more to what is shown, it doesn't appear the GPU was dead for 12 hours but rather ~1 minute. While there is usually a small delay in cgminer showing the sick or dead GPU and it reporting it through its API (+ up to 10 additional seconds because of the CGWatcher monitor interval), I think CGWatcher should have at least reported it by the time the screenshot was taken so there was still a CGWatcher issue. But I believe this would have been caused by incorrect GPU mapping, which may have been a result of the bugs that were found or may have been resolved with manual mapping (although the bugs still didn't help the situation.) The fact that the GPUs showed as INACTIVE means there was a mapping problem. I'd be interested to know if GPUs are correctly mapped with "--gpu-platform 1", and if not, if manually mapping them in CGWatcher corrects this. I'm not sure if the --no-adl option played a part in this... I want to say it didn't but I would need to test it some more and I'm getting ready to leave at the moment.
CGWatcher gets all mining data from cgminer (including GPU status) - it sends a command and waits for a response, then processes the response data. If there were problems that prevented a response, it would consider this as API access loss and react accordingly (although it may require several consecutive failures before taking action to make sure there is in fact a problem.) With 1.1.5.0, it also checks the status of the cgminer process, and if it is not responding for three consecutive checks it kills and restarts it.
As far as your increase in sick or dead GPUs, I can't explain that but I can say that CGWatcher should have no effect on this. While CGWatcher reads ADL data, it doesn't actually change anything so I don't think that would cause issues (and hasn't during testing). If this was the case, any hardware monitoring software like HWINFO, GPU-Z, AIDA64, etc. would also cause problems with cgminer. The same thing with OpenCL, and CGWatcher only polls OpenCL devices once on startup. When you change a GPU setting in CGWatcher, it just tells cgminer to change the setting so it isn't actually changing anything itself.
And as far as the cgminer logging options... I've never used any of those so I'm not sure why they don't work. When it comes to these types of options, I chose to include them in the Config File Editor because even though I don't use them, other people may and they may work in other versions of cgminer. If it doesn't work even outside of CGWatcher then it's not a CGWatcher problem.