What's wrong with my rear derailer shifting? -- solved!

Two weeks ago, I revamped an Austro Daimler Vent Noir to a more upright position with bar ends instead of downtime shifters.  Using a Surly Open Bar -- it can fit bar end shifters! -- I use silver shifters to an Origin 8 camp-on cable stoppers at the down tube with Jagwire mickey adjuster barrels which continue over the top of the bottom bracket to the rear derailer.

Silver shifter

Clamp-on cable stop with mickey adjuster barrel

Above bottom bracket path for cable

Chain stay cable stop

Rear derailer

Since converting the bike to use bar-ends, it took a noticeable amount of effort to shift to  larger cog on the rear and was always much faster to shift to smaller cogs.  I thought that this was an effect of widening the dropouts and using a 7 speed cluster with the old Shimano Crane derailer.  But to be frank, I didn't think much of it and decided to just ride it.  After a ride with a lot of climbing -- if you're local, through North Arlington along Nellie Custis and Military Road all the way to Glebe Road -- with the kids, I started having more trouble getting to the bigger cogs.  It deteriorated to the point that during the last mile or two, I could barely shift out of the smallest cog (13t) to the next larger one (15t).  

Putting it on the stand, the cable lost tension such that I thought that the fastening bolt simply was too loose.  After re-tightening the cable with tension, however, I couldn't move the derailer at all.  I can pull a little cable but the resistance becomes very high.  However, I can move the derailer by hand.  Two videos below demonstrate this.  

The housing from the shifter to the cable stop is new.  The housing on the rear, however, is old.  So my next thought is to put new housing there.  But the effect seemed so sudden and severe, that I thought to ask the greater cycling world whether there is something else I should consider.

Thanks for reading.

SOLVED!

Bill from the iBOB list correctly assessed and predicted the problem.  I had some slop in the housing leading to the downtube cable stop and used the wrong ferrule.  This resulted in the housing becoming "frayed" or as another person wrote, "herniated".

Part of housing poking through the ferrule

Both ends of the housing.