The way I see it is that the fallen powers the shadow continuously. There is a connection between the shadow and the fallen, so a circle isn't going to stop the fallen from feeding the shadow. A circle might break the connection between the coin and the holder, but not the fallen and the shadow.
I think this because the shadow is fueled by the fallen. If the connection is broken, then the shadow will have to fade away or drain energy from Harry. If it is draining energy from Harry, he would be weaker, not stronger. In White Night, the shadow uses Harry's energy to go against the fallen. The shadow looks worn and haggard.
As to whether or not Michael was okay with the beating of Cassius, being okay with something and thinking it's not wrong aren't the same thing. People are often okay with the wrong thing being done.
One way to look at the Knights is to view them as both a human and a Knight. The man may be willing to do something, but the knight doesn't have the power to interfere because the action is outside his job description. Michael probably wanted to help Ascher, but he probably didn't have the power to do so. It's said many times in the books that the Knights are more vulnerable when they aren't "on the job."
I often laugh at things I disapprove. It's most common with children. They do something wrong, but hilarious. I have to control the laughter or hide and laugh silently if someone else is correcting them.
