a. Make the setup work with the new balanced audio cables and restore the fidelity of the audio.
You don’t have new balanced audio; you have unbalanced stereo going into a balanced input which does not work and is why the audio sounds horrible and like things are missing. (Because they are.)
b. Change the setup in a way that the 1/8" to 2x 1/4" ...
I replaced the unbalanced cables with 1/8" to 1/4" cables, thinking that would fix it.
That's still an unbalanced cable. Your PC output is unbalanced, any cable connected to it will be unbalanced.
You could insert a DI between the PC output and the mixer. Use a passive DI or an active DI with a power supply. Experiment with the Ground lift switch.