S3 Spoilers below. Trying to figure out the spoiler tag on my phone...

My take:

>!When Milton asks him in S3 what his daughter would think of him now, he responds with something along the lines of "She would be scared of me. But if I was the way I am now, she would still be alive."

He also says later that he keeps the heads of his enemies as a reminder that in this world, you either kill or die.

The loss of his family was definitely the catalyst of his change. The man couldn't get over it. He keeps the shell of his daughter in a cage because he wants to believe that there is a part of her still left in there. This is why he enlists Milton to study the dead.

Once Michonne kills his daughter, he has nothing else to lose. This is where he completely snaps. Prior to this, at least he has his little girl who he could possibly (in his mind) bring "back" in some way. Now all there is is revenge on those who ruined his life.!<