If you listen closely, just before Mr. Cat gets punched and sent flying out of the building, you can hear a kiss sound. Kaeloo waited for Mr. Cat to actually kiss her before she responded in any way, because why would she deliberately sabotage her chances of getting a kiss from her crush?
Mr. Cat points out that Kaeloo's idea of a perfect world wouldn't allow him to commit any violent acts or allow her to transform and beat him up. She tries to dissuade him, but when he cuts her off and continues with his tirade, she gets mad and transforms. Why would Kaeloo get mad about Mr. Cat talking about how sad it makes him? Well, what's more infuriating than a loved one convincing themselves that you hate them and not listening to you when you try to reassure them that you do?
Mr. Cat kissing Kaeloo right after his outburst at her seems like Mood Whiplash until you realize that he's trying to make sure that he can still trigger angry responses from her.
Mr. Cat's mind twists the meaning of Kaeloo's generic essay on world peace so he interprets it as a declaration that she hates having him around. Just how insecure is he?
Mr. Cat talks about the rage-induced beatings Kaeloo inflicts on him as if they were gestures of affection, at one point even mentioning her "loving slaps to the face"; it's pretty obvious that Mr. Cat has learned to equate abuse and degradation to love.
