Very hard to watch..

Yes they were cold, I got a bit angry at her mother when she was instructing Taeko not to tell her classmate who got her role that she had been chosen first, lest she'd have hurt that girl's feelings. What about the feelings of your daughter, woman?! She has to see how nicely it goes for a girl who got what she had been denied, which had also been the thing she was truly good at. The other things seemed to a certain degree excusable - we were seeing the world through her eyes, and kids do sometimes see meanness when other people are just minding their own business or considering deeper consequences (at that age kids don't quite decode adult behavior properly), teenage kids can be mean to their young siblings while still loving them (the age combination is fairly exasperating for both parties), the father looked like a strict man and I expected him to make that decision because artists were regarded as morally ambiguous by old-fashioned strict people. But that dialogue with her mother on the street felt almost cruel (then again, considering other people's feelings before your own is a strong principle of Japanese culture, and maybe she was simply enforcing it over her daughter; still, it felt cruel). I am also a little suspicious at the elder sister, at the way in which she stressed the possibilities of a career in front of the father while he was deciding about Taeko acting in that play - she may have been enthusiastic about Taeko's future, but her reaction afterwards betrayed an ounce of malice, so maybe she did stress the career knowing that it would make father deny Taeko's request.

It could be that her family was presented like that in order to suggest the alienation caused by city life, in sharp contrast with the warm and cozy attitude of the people living in the countryside...

there's a highway that is curling up like smoke above her shoulder

Being born and raised in a Chinese family, I actually find Taeko's family to be very typical in a traditional Asian society. Parents don't coddle their kids and they use corporal punishment if necessary. Sibling rivalry is also very common because they are always fighting for their parents' affection. The father/husband always has the final word and he's usually the stern disciplinarian. So Taeko's childhood is not terribly different from my own. I relate so much to the family and the nostalgia. I guess that's why this is one of my favourite Ghibli films.

Not at all - I found the family to be perfectly normal. We are shown some memories of her which have been like little traumas - not because the family behaved horribly but because of her selfish behavior. The sisters are shown to be a bit distant so they get on each others' nerves but I never felt that there was no love between them. The father slapped her because she was acting out and was sulking at home. I felt the slap was from a mix of worry and anger. Nothing horrible.