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.
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.
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.
4. How corrupt is law enforcement (a 2+2 poster was caught with some weed and extorted out of $2000 USD in exchange for not getting booked - is this common?).
You shouldn't have problems here with law enforcement unless you kill somebody or do drug trafficking.
That said, I always hear that before and after loy krathong (sp.), xmas etc. the cops need more money and stop more cars for speeding/motobike-driver for not wearing a helmet. 100 baht = around 2.50$.