1. why does Michael's world suddenly become unholy and evil?
It wasn't sudden. Kay had been stewing about Michael's lies for a long time. When they danced at Anthony's party she reminded him that he'd said that the Corleone Family would be completely legitimate in five years--"That was seven years ago." AFter the Tahoe shooting, when she was clutching Mary, she gave him a look that said she was finished with his way of life. And, when he returned from Havana, she didn't even look up from her sewing machine.