Answer

Hello Pam and Gabriel,
I am sorry to hear about your concern.
Certainly, I would not jump to the euthanasia decision just yet.
My greatest concern is that if that toy was vomited up, what else could have been ingested that is causing additional symptoms of distress. Now, even if the cat toy was the only foreign body, it stil could have caused a lot of stomach wall inflammation while it was in there. I calso can't vouch just yet that the panting is not due to pain versus nausea from the dietary indiscretion.
Definitely, worth a veterinary evaluation to start, and absolutely some x-rays to ensure nothing else is still retained within the stomach or intestines. At that point, the vet may be able to offer some good medications to make him more comfortable.

In addition, if you are not already doing so, some great! alternatives for arthritis, even if severe, include doing a combination of the following:
1. Getting a non-steroidal anti-inflammatory from your vet called Rimadyl, Deramaxx, or Metecam.
2. Combine this with a pain medication called Tramadol, which you should also be able to get from your vet.

Hope that guidance helps.
Good Luck
Dr. Andy