something like this happend to my cat, she ended up having feline leukemia
something like this also happend to my dog, she ended up developing a flea allergy.. wasn't pretty
we ended up having to have the cat put down. while a friend took the dog for a while, and the problem cleared up there. they fell in love with her, and her problem didn't seem to bother her with them, so she ended up moving in for good :/
have you thought it might be an allergy to the flea medication you've been using? it looks like that balding spot on your kitty, is the same spot most people apply those "drop on" flea meds to