I lost a female cacatuoides to something like that awhile back. It was diagnosed by a much more experienced hobbiest as a systemic bacterial infection. I tried to treat with oral antibiotics, but to no avail. With fish, by the time you realize somethings wrong, it's often too late.
Bloodworms are fine for dwarf cichlids as long as they are fed in moderation. Find a good SMALL pellet or granule food that they will eat and feed this every day. rotate between several different frozen foods in the evening. Bloodworms and mysis shrimp are they two I feed the most.
Lastly, keep in mind that cacatuoides are the shortest lived of apistos. Females usually only live about a year (long enough to spawn a few times). By the time you get a female she is most likely 4-6 months old already depending on her size and the conditions she was raised under.
Edit: I should also add that I'm of the belief that cacatuoides, due to extensive line breeding, is one of the weakest apistos from a genetics standpoint. I see more physical deformations in this species (malformed mouths, bend fins....) than in less common species. It would not be unreasonable to assume that this weakness extends to thier physiology.