Michael is also human, not a saint..

True.

Considering everything, his reaction was very human.  Did he disapprove of what Harry did?  Yes, on no uncertain terms...  However at the same time Michael knows the kind of person Cassius is and what he was and one cannot blame him for enjoying the irony of Harry giving Cassius a quarter for a phone call after he had given up a coin.  He cannot be the judge of either Cassius or Harry for that matter, as a matter of his faith, judgement is for the Almighty, not him... At the same time he cannot be blamed for savoring a little dash of irony.

See, the thing is, when I disapprove of something, I don't laugh about it. Even when it might be funny, I try to avoid laughing because it undermines that disapproval.

To me, Michael laughing indicates that either he doesn't disapprove that much but feels obligated to say something or that he's being hypocritical/does not appear to care that much about Harry.

Hell, Michael and Sanya laugh about it.

He's a Knight and he might genuinely want to see the Denarians repent and be redeemed, but he's still a human and not above being a little glad when an asshole like Cassius gets a very-much-deserved asskicking from someone else.

Exactly. This is why I feel that Michael is reasonably okay with it.

No, you said the Fallen was powering the Hellfire; I'm positing that the Fallen is not, because it's contained in the coin and therefore incapable of acting directly on or through Harry. That's rather the point of it being in a coin in the first place -- it can't act without something else willing to let it act through it.

Does anyone have a copy of White Night that they can check? I don't have mine with me, but I think I remember something being said about this at the end (Bob saying something about how the shadow had a tiny piece of Lasciel's power that she stopped drawing on when she turned against Lasciel, I think).

When Rashid threatens Harry in Summer Knight it is because of the consequences of Harry taking the easy way out.  Thus showing himself not competent to be a true member of the White Council.  And in Turn Coat Harry risks a civil war within the Council.  And apparently Rashid thought  Harry might be part of the conspiracy to cause it.

Yes. And in Proven Guilty, according to this WAG, Rashid is trying to prevent the destruction of the universe by Outsiders (via making sure that Mab realizes what Nemesis is doing with Maeve).

Martin probably planned on turning and being the sacrifice.

This.

Michael did make the attempt to stop Harry, but could not convince him to not hurt Cassius.  Which pissed Harry off considerably because he doesn't understand Holy Knights or their purpose..

What you are missing is the context, Michael and company had defeated Cassius, in a ploy to save his ass, Cassius gave up his coin, which he knew would take the Holy Knights out of the fight.  He had hope that his fellow Denarians would still take him back and he'd gain another coin.  Harry saw though this and didn't understand the constraints that Michael has to fight under... If he had tried to continue the fight after Cassius gave up the coin, his Sword would have shattered just as Murphy's had against Nic...  Harry continued to want to take him out, but now the fight was out of Michael's hands, but he did try to talk Harry out of injuring Cassius, Sanya, not so much..

I understand the context: that's why my assumption is that Michael is at least marginally okay with the torture, even though his job means that he can't acknowledge it. 

Did Michael try to talk Harry out of it? I was under the impression that he explained why he couldn't do anything, not that he was trying to convince Harry not to do anything.

Dependency,  the more the potential host uses it, the greater the influence which eventually leads to the acceptance of the coin which is the goal of the shadow.  Consider, on one level Harry was resisting Lasciel, but at the same time over time he became more and more dependent upon the use of things like hellfire, and he wasn't aware of how it was changing him.... It took Murphy's sit down and the incident with Molly and the fireball for him to realize how the shadow was changing him.

Once again, this advances the shadow's goals, but it doesn't seem to strengthen the shadow itself. An analogy would be the Alphas deciding to work with Harry: It makes Harry more effective at accomplishing his goals, but it doesn't make him able to, for example, lift more weight or throw spells harder, and he's not going to pop out of existence spontaneously if all his allies suddenly stop working with him (the fact that he'll probably get killed is beside the point).

The Knights have a narrow lane with in to work, like for angels the rules are very strict.  The mission  is enable redemption by getting the Denarian they are fighting to give up their coins, or kill them in the process.. However once the coin is given up, it is out of their hands.  That is why they refused to
mess with Cassius once he gave up his coin... Free will, it didn't matter what Cassius had done or was, without the coin he now had a chance to live the rest of his life redeeming himself ultimately or not, it was out of their hands.

It can't be that narrow. Redeeming Denarians may be their primary purpose, but Michael has fought humans summoning non-Fallen demons, Hobs, and Outsiders at least. Based on what Michael said about why he couldn't help Hannah at the Gate of Fire, I'd assume that part of their job is also the protection of the innocent.

That is the "catch 22" of free will, Harry's choice to punish and seek revenge over Cassius..  That isn't the job of a Knight, that is for the Almighty, what Cassius chose to do from there on out was his..

True. But I don't think free will would have prevented Michael from trying to convince Harry not to/stop him from torturing Cassius, and if Michael truly believed that it was genuinely Wrong, as opposed to techically-wrong-but-actually-not, then he should have made the attempt.

Now, I don't actually believe he did think it was Wrong, under the circumstances, just like I believe that he didn't think it was Wrong to lie to Harry in service of saving his soul from being corrupted by the Fallen.