For 1, this is well established history that I didn't feel was necessary to provide sources for. That said, the vox article linked to by jeromegv does a good job of describing the transition.

For 2, I'd make a distinction between paths built for long-distance travel (roads) and paths built for connecting to destinations (streets). The two have fundamentally different goals that cannot be safely achieved at the same time. To allow for high-speed travel, a road should be as predictable as possible, with limited entrances and exits and barriers to prevent people and animals from wandering onto the road, and should be restricted to vehicles that can maintain a high speed. To allow streets to connect to destinations; such as homes, shops, and workplaces; there should be many entrances and exits to the street. The destinations should be packed as tightly as possible, so that they can be reached with a minimal distance traveled. It's not just that these goals require tradeoffs, but that they are fundamentally antithetical to each other.

The best way to satisfy these two goals is by having separate designs for streets and roads. The roads are pathed around pedestrian areas, and allow branching off into them at limited locations. The streets are mixed use, with rougher surfaces (e.g. brick/cobblestone) to prevent high-speed travel. This doesn't exclude motor vehicles from using roads altogether, allowing for use cases such as delivering food to cornershops or dropping off somebody with limited mobility, but does steer motorized traffic off of the streets and onto the roads wherever possible.