Hi Scootles, welcome to Orchidtalk.
I'm not a Phal grower, so will let the other members who grow Phals help out on this one... it looks like you have done a fair bit to help it along... and certainly if the root system was bad, then it's natural that the plant will try and get more nourishment by sacrificing some of it's older leaves... i would try increasing the humidity like you said though, ie sitting the pot in a bed of rocks.
good luck with it.
cheers
tim