Malady's magic resistance shred was able to bring an enemy's magic resistance below zero.
The very first auto attack did not get the benefit of the magic resistance reduction. Any magic damage from the auto attack was calculated first, and the debuff was applied after. This means the full benefit of the reduction was seen on the 8th hit after all 7 stacks had been applied.
Malady was beneficial on champions that rely on attack speed and on-hit effects.
Warwick is a great example of such; his bonus magic damage and abilities that apply on-hit effects benefit greatly from the added magic reduction and magic damage, as well as his basic attacks being supplemented by the AS.
Malady's passive was not named. It was not Spellblade, so it stacked with Lich Bane and similar items.
Malady's own AP bonus granted extra 2.5 magic damage per auto attack.
Malady's on-hit damage becomes as strong as Wit's End's at 270 AP.