Most of the context can be filled in based on educated guesses and reading between the lines of Winnowill's narration, but I wasn't able to figure out what it was, exactly, that broke things.

I had to lay the two panels sovay linked against one another to figure it out; Winnowill's first flashback doesn't make it clear, but the second one fills in the gaps. As for what one takes away from that, it depends a lot on how you read the suggestion that Smelt "came back to himself." The more negative interpretation is that Winnowill had genuinely been interfering with his mind, and he broke free of her control; the more ambiguous, and therefore more interesting to me, interpretation is that their relationship was not a result of brainwashing, and the bloom just went off the rose for Smelt.

Now that I'm rereading the series as an adult rather than a kid, I'm all too aware that Two-Edge is the very definition of a Tragic Mulatto character, but at least he has some in-canon reasons for being that way, other than just "the two parts of his heritage don't get along" -- though that is also part of it, based on the last few issues of the original quest.

He probably would have had social issues trying to fit into either society had Winnowill left him alone -- but yes, it's strongly indicated that his insanity is a result of her actively inducing a split in his mind.