Welcome to the pancreatitis cats club! This is going to sound like ranting gobbledygook, but I'll try to sum it up neatly at the end.
My cat has a working diagnosis of chronic-active pancreatitis (chronic and progressive, instead of just plain chronic and low-grade). That could change as time goes by, but it's what we're working with now.
Yes, chronic pancreatitis can cause diabetes. The pancreas has two main jobs: to produce digestive enzymes ("exocrine" function) and insulin ("endocrine" function). In pancreatitis, the pancreas begins to autodigest (digests itself and the fat around it), and as the tissues of the organ are destroyed and it loses its ability to do those jobs, resulting in either Exocrine Pancreatic Insufficiency (or EPI: the inability to produce digestive enzymes) or diabetes (inability to produce insulin)...or both. Most cats with chronic pancreatitis probably go undiagnosed (because the disease just "smoudlers" and never shows clinical "pancreatitis" symptoms) and die of other causes or secondary complications (like diabetes). Most cases of feline pancreatitis are idiopathic (no known cause). Frustrating.
So, what you're left with is how do you diagnose pancreatitis and treat it? The only completely definitive diagnostic tool for pancreatitis is a biopsy, and even that may be harder on the cat than is warranted. There's really no treatment or cure for chronic pancreatitis, so I couldn't justfy the biopsy in my cat. If you want to go with some other options, Testing the pancreatic lipase (fPLI) and trypsin-like immunoreactivity (fTLI) can be useful...both are blood tests which need to be sent out to special labs (the fPLI is supposed to be more sensitive and useful).
For in-house blood tests, look for a standard chemistry panel measuring things like ALT and ALKP (liver enzymes...the liver often gets damaged by pancreatitis), kidney values, blood proteins and glucose, as well as amylase and lipase (although not generally useful, they can help confirm the diagnosis if elevated). Also, a CBC to measure red and white blood counts is helpful in determining if the cat is anemic (not uncommon) or if the pancreatitis is being caused by a parasite (like a fluke), or if there's an active inflammation or infection going on. My cat's had several panels done in the last couple of months, with wildly varying (and often confounding) results.
The ultrasound can help determine how much (if any) damage has been done, and if there are any leisons on the liver. I had one done for Assumpta. The thing that the ultrasound may help with is in checking to see if there are signs of liver disease or inflammation of the small bowels (pancreatitis often shows up in combination with hepatitis and irritable bowel disease, a combination called triaditis...there are a ton of ducts and passageways that converge around the pancreas, and it's possible for more than one organ to be affected because they're all so closely connected).
Now (my summing up part)...there's really no absolutely definitive blood test for pancreatitis (the fPLI is as close as it gets). There's no real treatment for chronic pancreatitis, other than supportive care (good food, moderate diet, stress reduction, perhaps antinausea drugs, and subcutaneous fluids if the cat is dehydrated from vomiting...antibiotics if there's an infection, and deworming meds to kill off parasites if suspected). But there's no way to "cure" it, and diagnosis is really difficult. It may make more sense to concentrate on that kind of supportive care and treat for complications...if funds are limited and chronic pancreatitis is strongly suspected, work with that tenative diagnosis as best you can. I'd be most concerned with making sure there hasn't been significant liver damage, as that can really complicate things...so I would make the basic bloodwork a priority, do the fPLI if it's possible, and if you can do the ultrasound, do it (especially if the liver values come back weird), but push the bloodwork first. The danger with a persistently vomiting cat is the development of hepatic lipidosis (a liver disease), so antinausea drugs may help ward that off. In dogs, they fast the animal for several days to rest the pancreas, but in cats it's usually too risky, so the usual thing is to feed them a bland, lowfat, easily digested diet and get them to keep it down.
Which leaves you with a diabetic cat...THAT needs to be treated, and can be successfully managed with proper care. That's the good news. The pancreatitis isn't really something you can cure, so the emphasis is just on supporting the cat and dealing with complications as they come. Some cats seem to live for quite a long time with low-grade chronic pancreatitis, and no one even knows they have it until the cat dies from other causes and they do an autopsy. It may not get better, but it may also not get worse quickly, either. It usually takes a series of blood tests over time to diagnose diabetes...there are several people here with diabetic cats who are managing the disease well with low-carb diets and insulin (I'll let Annissa et al take the diabetes questions, though, as they know more than me).
If you want any more info on pancreatitis, PM me your email address and I'll forward the stuff I have when I get back from the shelter Tuesday AM.
Edited for a spelling error, and to add that siamese cats are often mentioned as being disproportionately represented in pancreatitis cases.