I just have a phal-type Den, but like the other poster said, they can be very resourceful! My Denrobium looked to be at the end of its rope, but after potting it in a very small pot and watering just when it got dry a new cane sprouted. You can see the growth of the new cane
here.
Anyways, as far as the sphag n' bag method, I'm not really sure. Hopefully someone chimes in with some suggestions, but some photos would help everyone else know what you're dealing with and how to advise.
I just wanted to post and say don't give up just yet, it took a few months, but new growth started on mine and it's thriving now.