Diocesan request, stalled, undermines, terminally

The future Pope resisted pleas to return a paedophile priest to lay status, it emerged yesterday, as the torrent of cases from around the world showed little sign of abating.
A 1985 letter bearing the signature of Joseph Ratzinger undermines, possibly terminally, the insistence by the Holy See that Benedict XVI played no part in protecting paedophile priests. In the letter, Ratzinger, head of the Roman Catholic Church's disciplinary body, the Congregation for the Doctrine of the Faith, stalled - but also quoting the "good of the universal church" - on a diocesan request for action against Father Stephen Kiesle, a Californian priest.
The news from England is not much better. Nearly a decade ago the Catholic bishops of England and Wales set up a child protection system to catch paedophile priests. It seemed that the Church here had gained the moral high ground in contrast to scandals elsewhere.
But the case exposed today by The Times shows that at least one paedophile priest remained free to abuse children until recently, even after authorities were repeatedly alerted to his actions.

Please explain to me the emboldened parts.
Though I know "diocesan" is an controlled by Bishop. "undermines" is "make less true" and terminally is "extremely"
Source : http://www.timesonline.co.uk/tol/comment/faith/article7093811.ece#cid=OTC-RSS&attr=797084