Yeah, it was mostly the result of the six major preceding Popes (as I recall there were two others, but they died to early to have much influence). Not to say that there was no growing discontent whatsoever, but these six powerful Popes had ample opporunity to address the rising discontent - and instead of take action to address spiritual dilemmas, they used violence to silence voices.
Barbara Tuchman covers this period extensively in her book The March of Folly
. If you are interested in the build up to the Reformation and the political mishandling of that buildup, her section on those Pope's is an invaluable overview. Besides, she's just a great historian.
You mention payment for spiritual gain, selling of absolution - this was an invention of these Popes, used to fund wars and parties. People knew this at the time, and the policy created quite a controversy. The thing was, these Popes were so insulated in their beyond-reproach world that they did not care. It wasn't until the French sack Rome, finally, that they begin to realize that the Holy See is not protected by appearance of divinity - and even then, the response is entirely political and military, rather than spiritual.
As for imposing the spiritual domain over the temporal, I am not sure this is necessarily dangerous. Though, there is no doubt it opens the door for abuse - but then again, any temporal power does this. It is interesting - about the same time you have secular Popes in Rome, you have secular Lamas in Lhasa. So, the real issue is how well those in the position of temporal/spiritual power understand the importance of their role; if they understand that their spiritual worth can be diminished by their handling of temporal matters, the leader is likely to be at least decent. So, I would suggest that it is not so much the coupling of these roles, but instead the extent to which people in these roles pay attention to the conditions of their subjects, both temporal and spiritual. A leader well connected to his people is more likely to rule wisely.