Select T to add a text
Rasterize the text by right click on the layer > Rasterize
go to Photoshop menu bar > Window > Liquefy and with the first option on the top left corner selected, adjust the size of the brush and the pressure
There's already commented that your envelope is too complex. I tried to draw a simpler envelope, but the result was still a mess. The resulted distortion of complex shapes like your text isn't easily predictable.
Drag your text to the Brushes collection and define it to be an Art brush:
In the left there's your text (actually an outline ...
A guess: You have gaps which are invisible in screen resolution or you haven't selected the ignored lines to be a part of the live paint group. The visible nodes in your screenshot doesn't tell 100% surely which paths are selected, but I believe this is a gap problem.
Live paint bucket has Gap options. By setting gap detection ON you can close gaps, if that'...