Firkin destructive tests have been done to antique wootz pieces. I believe one collector in the early part of the 20th century donated quite a few of his low end pieces for destructive testing. Also accidents happen, and good pieces are sometimes damaged as well, so off to destructive testing. There has been quite a bit of study on wootz. Also something as simple as etching can tell one a whole lot about how a piece is made.
As for why to fold steel when making blades, most cultures used pattern welding to some extent before the advent of modern steel (actually wootz is a historical exception which is part of its mystique), from the twist cores of viking swords to the roughened intricit patterns of Indonesian keris. Essentially before modern steel production methods were perfected, making steel was quite a pain, and so steel was expensive. Also the method of making said steel was not perfect, so laminating was very important way to make the quality steel spread a little further, as well as hopefully refining the less perfect steel a little bit. What the Japanese did was take pattern welding to a higher level of refinement, but that was also partly due to thier own difficulty in getting quality steel. Japan was never resource rich, and the iron bearing sand that they made thier steel out of wasnt exactly the best source. So they did thier best trying to make an imprefect situation workable. Hence the Japanese sword.
As for Paul Chen, he is not a smith himself but a factory owner. There's a bunch written about him on Sword Forum International, or at least there used to be (been a while since I actually bother reading all the katana stuff). The big thing with the swedish powder steel is that its an easy way to get that damascened effect without all that pesky welding (Paul Chen steel folds em a few times but not as much as the old fashioned wau). The weakness of pattern welding is that each time you make a fold/layer you get a potential weak point as slag incursions or other defects can sometimes lead to a potentially bad weld. Bad welds arent as obvious in newer blades, but as they age and natural wear tends to make them pop up in the forms of de-lamination (point where the weld is literally coming apart). Many modern smiths have proven that modern steels are as good or in many cases superior to ancient steels. Im sure if the old time smiths in Japan could have accessed mercedes leaf springs they would have used them.
Anyways heres a good article on various pattern welding traditions in various cultures
http://www.vikingsword.com/ethsword/patterns.html
As for cutting effectiveness, Ive cut with katana, tulwar, khukris, bolo, kampilan, kris, barong, etc... Outa all of them the best cut I ever got was with a 100+ year old straight kris from Sulu. Amazing cutting feats have been done many times in history, and with many different types of swords. There are well documented Spanish accounts of Moro Warriors cutting chargin Spanish horse in half with thier Kampilans. In thier war against the Aztecs, Spanish conquestadors were seen cutting in half up to three charging warriors with a single cut with thier toledo made swords. However the stories of swords cutting through cung barrels or concrete blocks are just myths. A modern smith did experiments with that on donated gun barrels. I thing the best he did was scoring a barrel, nothing close to even cutting the barrel in half. Anyways, as has been said good steel is good steel. Its the wielder not the weapon that makes it lethal (at least if you dont listen to some of the legends of flying keris seeking out victims at night).