So before Vatican 2, and well throughout the history of Catholicism and even in the Old Testament i suppose, Catholics would not "socialize" with non-Catholics [...]
That part is not really true. Even in Catholic nations -- Argentina, the Philippines, France, Italy -- socializing would depend on class and proximity. In France, there have been upper class Protestant people who associated with Catholics; on the other hand, socializing wouldn't extend to religious ceremonies or anything forbidden (secret societies, etc). For instance, my godmother was raised Anglican. Her father was a prominent diplomat. Her family wasn't shunned and she did convert (although she has reverted).
nor with people living in public sin?
This part is generally true, although people would not be aggressive and cruel in their "shunning." People just wouldn't visit people at their homes who were living in sin or invite them out, etc; sometimes close family would try to speak with them about situations in private. For those of us from non-Western countries, this is still the case.
I think it's important not to "shun" people based on arrogance, malice, and pride. I myself have had to distance myself from a lot of people and things because I feel morally polluted: I don't watch movies or most tv, listen to new music, go out on dates, etc.
Part of what's impacted me is working with youth and realizing how truly perverse and corrupt they are and how the world is becoming -- I don't just feel revulsion, but sadness. There are BILLIONS of people in the world that would choose lust before love, greed before satisfaction, war before peace. There are people who have no idea what love is and hate God and live without hope.
I've just decided I don't want to be a part of it. It means that I do choose to limit interactions with people. My life is consequently very simple and I'm grateful for it.