canceling her skill with the iron throne, what happens to Catelyn?

Judge of the tournament here said she was back to hand canceled by the Iron Throne, which I thought was absurd …. it was canceled or is discarded game (because the hand was played as an action) or remains in play but canceled the ability to enter the challenge and kneeling

When Catelyn's ability is cancelled, she never leaves the hand in the first place. Putting her into play is part of the effect of her character ability. If the effect is cancelled, she never leaves hand in the first place.

Note, though, that it is useless to cancel her character ability, since her controller could just trigger her ability again after it was cancelled.

EDIT: Oops. As Rave pointed out in his answer to the same question over on cgdb, Catelyn's ability doesn't count as a triggered character ability at all, since it is triggered from OOP. Thus, The Iron Throne can't cancel her in the first place.

http://www.cardgamedb.com/forums/index.php?/topic/8463-catelyn-stark-low-vs-iron-throne-lannister/

If she was cancelled by an effect that cancels triggered effects, like Alannys, To Be A Kraken or Seasick, my original answer would apply, though.