Can't tell for sure, but it wouldn't surprise me if the stem is rotted. Remove from pot and try to remove the lower leaves to view the stem and if nasty looking remove as many good leaves as you can and try to root them and grow new plants. If there is any good stem left, you can cut above the rot and callous and root the stem after removing the yellowed leaves.

I agree, the darkness that I see towards the center of the plant makes it seem like the stem has rotted. That would explain why you have yellowing leaves in multiple locations. Your best bet if that is the case is to pull off the best leaves and hope you can use them to propagate. Your soil could be too water-retentive, if it is cactus soil straight out of the bag then it almost certainly is. Cutting it in half (or more than half, up to 70%) with perlite is a good first step. Just the fact that you said when you pull the plant out of the pot the soil keeps its shape is a good indicator that it is not suited to this type of plant.

On the bright side, E. 'Dondo' is readily available and inexpensive if you need to replace it. Hopefully you can get some babies from those leaves, though!

Good luck!