I'll do my usual block of replies at some point later, but one needs special attention...
1) Dr loki has kindly pointed out the gameplay reasons for choosing Patron of the Arts. Other than that, though, it's a role-playing choice: I like to take it at some point during my games unless I have a special reason not to (a strict Lutheran Germany for example), James IV is probably my favourite historical monarch and some of my characterisation of Mikhael is based on him, and, quite simply, I like to think that if I ran a country myself, I would leave a great artistic and cultural legacy for those who came after me
2) A well-thumbed Oxford World's Classics copy of The Prince sits conveniently nearby, nestled between Warren Farrell's The Liberated Man and the autobiography of Ferenc Puskas *wields*
So, what he actually said was...
Chapter XVII: Of cruelty and mercy (etc)
'[...] every prince must desire to be considered merciful and not cruel; nevertheless he must take care not to use such mercy badly [...] one would like to be both one and the other [loved and feared]. But since it is difficult to be both together, it is much safer to be feared than to be loved, when one of the two must be lacking.'
(my emphasis and judicious editing)
So in short, Machiavelli does say that if one of the two two must be rejected it should be love, not fear. Mikhael does not refute this: he says, as Machiavelli does, that both are important and both are to be aspired to