Molly adding fear in response to drug use was what landed her Lawbreaker in the first place, so I'm pretty sure you're wrong there.
This, I think, is where the system becomes useful. Harry & Co. have to talk in vague terms like suggestion (acceptable) and compulsion (Lawbreaking.) We can talk about maneuvers, blocks, and taken out results. Since the first two can be overcome via fate point expenditure and good rolling respectively they can be considered suggestions, while the latter cannot be overcome once established, so it would be a compulsion.
Molly did some extensive rewiring work in her friends' heads, making them mortally terrified of taking heroin. The end result, in game terms, was that they were unable to nut up and do some smack if it were important enough. She took them out and changed them at a basic level (isn't there some passage in the book about the Fourth Law being the mental equivalent of the Second?)
Being the one to initiate a mental conflict is likely to keep you from going to that hat convention this summer.
Agreed. IMO outside of training there's no reason to engage in mental conflict via magic other than trying to rewire someone.