Well, he is sad about the death of the one kid. Probably because it's the only kid in ME1 to ME3, so it ruined his life after the one and only child has died. :>
Yea, they wanted to make Shepard look like under pressure, slowly running down, etc. pretty sure. But it horrible failed, imo. These dream sequences and stuff are super crap and I haven't met anyone yet who cares about the child. Instead, they should have made it possible for Shepard to become an alcohol addict (if the player goes drinking all the time), his beard should grow, he should just look much more ****ed up the more you progress, etc. Had to think about Battlestar Galactica (the new stuff) all the time, where the characters changed their look a bit over time. Something like this is missing in the game.