I don't think Michael cracked up in II. The most wrenching emotional event in his life was Apollonia's murder. Before that he was still capable of love, of passion--even of playfulness, as we saw. But when Apollonia was killed, Michael was hit with the worst tragedy of his life. He was also saddled with the knowledge that the long arm of Mafia treachery extended right into Don Tomassino's supposedly secure compound--and that his wife was blown to bits by a bomb that was intended for him. After that, Michael was an emotional zombie. Sure, he had two bad shocks in II--Fredo's betrayal and Kay's estrangement and abortion. But by that time, he was too cold and self-centered to have been pushed over the edge. That happened in Sicily, years earlier.
Michael's life is a tragedy. The tragedy is in his choosing a life of crime when he had alternatives at every step in his descent. It's ther stuff of opera--which the Trilogy is in more ways than one.
Actually, the most most wrenching emotional event was the murder of Mary.
Until that point, he was healing. The coldness is thawing. You even begin to see the playfulness return in GFIII. After that, there is no hope for Michael ever finding any sort of peace.
Beyond being a terrible personal tragedy, the murder of Mary demonstrates Michael's hypocrisy and ultimate failure. He justifies everything by saying he needed to protect his family. But he's lost almost everyone and, in the process of trying to get them back, loses his most beloved family member forever.
