I would not use sphag for Catts. I think 4 inch basket is too small - does not leave room for growth. 6 inch with medium bark would be better. (with that arrangement, it dries fast, you're not going to get that soggy wet spot in the middle that you'd get with a pot. Or, a 5 inch clay pot (with bark) would also be good for a plant like this.
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If you use a plastic basket and want to prevent the bark from falling out of the holes, those mesh bags that vegetables sometimes come in, make a great material for lining the basket without impacting the air circulation.
Also, the choice of basket vs pot decision should be influenced by your watering practice. In a basket, the plant will need to be watered every 2 or 3 days (more in summer). Pretty impossible to overwater in that arrangement. But if you want to limit your watering to once a week or so then pot is better.
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