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1. What would a middle class (North American standards) couple with no children have to spend per month on food/lodging/entertainment etc.. if they wanted to "upgrade" and live "well"?
Not Degen, but anyway:
A couple should get by very, very well with 2-3k $. The reason why it isn't less is that you can afford to do many nice things. The price is cheap in each case, but it adds up.
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2. What are the biggest issues with living in what is commonly accepted as a third world country?
You are far away from friends and family.
It is dirtier than in america/europe/australia.
The traffic is chaotic.
See question #3.
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3. How reliable is basic infrastructure (electricity/cable/internet/roads/public transport - etc...)?
You have power outages (arund 1 per month where I live). DSL is not very reliable, so you should use a UPS and a second internet connection to be fine. The roads aren't great, but not that bad either. I don't know much about public transport because I use taxis (very cheap) in general.
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4. How corrupt is law enforcement (a 2+2 poster was caught with some weed and extorted out of $2000 USD in exchange for not getting booked - is this common?).
You shouldn't have problems here with law enforcement unless you kill somebody or do drug trafficking.
That said, I always hear that before and after loy krathong (sp.), xmas etc. the cops need more money and stop more cars for speeding/motobike-driver for not wearing a helmet. 100 baht = around 2.50$.