[RPG] Reduce Size/ Polymorph into smaller creature wearing off in cramped space

The Disguise bonus is only relevant if you're making a disguise (and therefore a Disguise check) and using (e.g.) Wild Shape to help with it.

Otherwise, the Disguise bonus is irrelevant and no, does not imply that people can just see through the Wild Shape using Perception against the normal Disguise rules.

Notice that nowhere in the rules for Transmutation (polymorph) does it say you have to roll a Disguise check to have or maintain any of the effects of being shapechanged. The bonus is only mentioned so it can be used in other circumstances that do require a Disguise check.

Thinking about a cat hasn't been helpful as an example, so let's start fresh with a different example and consider a bear.

Case 1: You're Wild Shaping into a bear because you want to bear around a forest. Here, Disguise stuff is irrelevant.

Case 2: You're Wild Shaping into a bear because you want to fool the local goblin tribe that you're their totem bear, Great Paw, and you want to give them an "omen" that will make them move out of the forest. Disguise checks will be necessary here to make you look like Great Paw, and Wild Shape gives you a +10.

RAW, yes, you can choose to ignore baleful polymorph if you have some other polymorph effect, and the rule dispelling the existing effect is meaningless

You can only be affected by one polymorph spell at a time. If a new polymorph spell is cast on you (or you activate a polymorph effect, such as wild shape), you can decide whether or not to allow it to affect you.

When baleful polymorph is cast on you, that is, long before we determine whether or not it has any effect, you can elect to simply have it not affect you.

Any polymorph effects on the target are automatically dispelled when a target fails to resist the effects of baleful polymorph, and as long as baleful polymorph remains in effect, the target cannot use other polymorph spells or effects to assume a new form.

If you don’t allow it to affect you, you do not have to attempt to resist it, which means you cannot fail to resist it, which means it cannot dispel your existing effect.

The timing here is inarguable: you choose whether or not to accept baleful polymorph instead of any existing polymorph effect before you attempt to resist it, which means you do so before it can dispel your effect. Dispelling your effect is a part of what baleful polymorph does, which means it’s also part of what you can choose to not accept when it’s cast on you.

The intent of the dispel line is clear, but unfortunately the way they chose to write the polymorph-non-stacking rules was too hardline; it gave them no time to attempt something like that without giving baleful polymorph an explicit override. They did not, and so baleful polymorph can only dispel some other polymorph effect if you let it.