What did Malack do that made Nale hate him so much?

[dancrilis]

I put my 2 copper pieces that all Malack had to do was make an actual insult toward the little hellspawn, and that'd be enough to warrant murdering his kids.

I would disagree - while Nale had his moral failings sure, but he did not harm those related to his target to enact his revenge (without cause).

Look at the plot with Roy's sister - he had her captured, he had every reason to dislike Roy, he had a creepy stalker that had been interested in her on his pay role etc.
What happened to her - nothing.
She was captured as part of his beef with the Order of the Stick and Elan in particular, as such there was no need to get properly bent out of shape about her (even when she insulted him, and showed him up in relation to the 25 word limit of sending).
Nor did he go back to deal with her later (that we know of).

Had it been Tarquin rather than Nale, Julia may have suffered much much worse.

Or to sum up - Nale likely killed Malack's kids for the exact reason he said, practice.