I don't know about sugar in Milk Bones, but I had 2 Lhasas years ago that had diabetes and were on insulin, and as they got older, they were more difficult to regulate. Your dog's aging may have something to do with it. They were both diagnosed at around 10 years of age, and one lived to be 14, and the other was 16. The one that passed at 16 was ALWAYS more difficult to control tho. She had readings in the 600's at times, and other times she would bottom out and I'd have to give her Kayro Syrup to bring her back up.

Hope you can find out what's causing the problem, tho it's something that you may never be able to pinpoint. Good luck!