Past
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Surprises
When the Inutachi returns to Kaede's village discouraged by their failure to reach the last jewel shard the elderly miko takes Kagome and Shippo aside to tell them the story of Kikyou and how she came to guard the Shikon. Kagome is shocked to learn that Kikyou and Tsubaki, the dark priestess she met early in her quest, once fought side by side.
Tsubaki at that time prophesied that Kikyou would die a violent death should she ever fall in love.
Not much later the Tajina tribe Sango would later be born into found the Shikon jewel and entrusted it to Kikyou, making the miko a target for an endless stream of greedy demons. What Kagome did not expect is that Inuyasha was one of those demons, yet Kikyou let him live time after time.
Selfish
Kikyou later took in and healed the bandit Onigumo and was confronted by Tsubaki, who had noticed the miko's affection for Inuyasha. A while later Onigumo, who had fully recovered and fallen in love with Kikyou himself, made a deal with a demon and became Naraku then attempted to steal the shikon. Kaede told Kagome and Shippo –and Miroku and Sango since they were hovering within hearing distance- that this was when she lost her eye.
Tired of fighting off then endless procession of demons, Kikyou suggested to Inuyasha that he use the Shikon to wish to be human, as such a sefless wish would use up its power.
Kagome feels Kikyou's suggestion was entirely selfish. Asking a person in love with you to change themselves is not a sign that you truly love them as they are.
Distrust
The rest of the tale Kaede only pieced together after the events had passed: Naraku impersonated Inuyasha and stole the jewel from Kikyou, wounding her, then –wearing the shikon– attacked Inuyasha disguised as Kikyou, which tainted the gem. Naraku then put the shikon back in Kikyou's home and watched as Inuyasha stole the jewel and was sealed in the Tree of Ages by Kikyou's arrow.
Inutaisho thinks that the story proves that the tragic duo did not truly love one another. The lack of trust and forgiveness between the two is evidence enough to the Dog General's mind of the shallowness of their relationship. That the miko wanted to change Inuyasha –making him weaker so he is socially acceptable– is just the final nail in the coffin. A more selfless wish would have been for Kikyou to desire the hanyou to become a true demon: truly unselfish as she did not want it to occur.
Relent
Kagome hopes Inuyasha will get over Kikyou before the undead miko resurfaces, but she is not overly optimistic. The hanyou is like a dog with a bone about some things and this is one of them.
The flashback in Episodes 147-148. I honestly don't think Kikyou or Inuyasha had more than a crush on eachother; the thrill of the forbidden and all that jazz.
