Words flipping from positive to negative and visa versa is very common in language. Just the other day I was talking to some younger kids about hockey and they were going on about a goal being "filthy" and "Dirty". In my day a dirty goal was one that didn't look nice. To them these goals were so naughty(as in sexy) you wanted to take a shower after seeing them.

Here's some reading http://www.dailykos.com/story/2014/03/15/1284995/-Origins-of...

I don't think this particular case is a new-ish usage; "filthy" has long been popular in baseball to describe a very crafty pitch or pitcher, or "sick" in music for an amazing solo or musician.

Probably by means of partial understanding. Someone talks about "an awful battle", or "the awful day of judgment", and people (especially children) might understand it as fearsome and potentially very bad, and use the word exclusively in that sense. It's easy to imagine the definition migrating to simply, "very bad".