OK, the reason for the title change was because Hogan was leaving for most of the summer to shoot No Holds Barred and they needed someone else as champion who could draw on top at house shows. The original choice was DiBiase to set up a DiBiase-Hogan title match down the line (possibly SummerSlam or likely WrestleMania V.)
The tournament format was set up to allow DiBiase to get the belt without having to beat Hogan directly, to save that match and allow Hogan to be pushed as a guy who unjustly lost his title, and because Hogan vs. Andre was a bigger match for The Main Event than Hogan vs. DiBiase.
With Hogan getting screwed out of the title on the NBC special, and Demolition on course to win the tag team titles (Vince had a philosophy of not having all three titles controlled by all heels or all faces) he made the call to put Savage over Honky Tonk Man, giving the Intercontinental Title story and Savage-HTM feud some closure.
The problems started when Honky was at Vince's house to discuss booking plans, and Vince all but ignored HTM. Lavishing praise on Savage (who was also there) and constantly talking about future plans for Randy, Honky was treated as an afterthought every time he enquired about where he would go after dropping the title. Honky, on the hot streak of a lifetime and making more money than he ever had (or likely ever would) felt insulted by Vince's pandering to Savage and refusal to offer HTM any sort of compensation for giving up his spot, called up Jim Crockett and cut a deal to go work for the NWA, promising to take the title with him. If I recall, Honky didn't want to go but felt it was the best way to get Vince's attention.
Acquiescing to Honky's viewpoint (and not wanting his secondary champion showing up on opposition television), Vince was instead faced with the dilemma of breaking the news to Savage, who was understandably upset over the promise Vince was now breaking. Savage (I think) threatened to shoot on HTM on the live show, so Vince instead offered up a make-good solution - Honky would keep the IC title, Savage would win the WWF title at WrestleMania, and DiBiase would take the strap from Savage at SummerSlam to keep the DiBiase-Hogan program on course. Fate intervened, as Savage on top began drawing just as strongly as Hogan had done, and ultimately there was no point in taking the strap off Savage under those circumstances.
By the summer, Honky, realising the time was right, did everything in his power to put Ultimate Warrior over as a superstar, whilst a new story was devised built around the Mega Power Meltdown, leading to WrestleMania V breaking the all-time pro wrestling pay-per-view buys record, a record which stood for years. DiBiase had a good run on top that summer but for the second time in his career, was an also-ran when it came to being world champion (he was under consideration for the NWA title at one point before it went to Flair who had stronger connections with the majority of promoters on the NWA board) until he was placated somewhat with the creation of the Million Dollar Belt (because why wouldn't a guy with that much money just buy his own championship?)
The only contentious issue after all of that was the belief in some quarters that Savage should have won at WrestleMania V, the proof coming after Hogan had won the belt back. At that point, the WWF would run A and B (and sometimes C) house shows. Hogan as champion had headlined the A shows and drawn the biggest houses, whilst Savage would headline the b-shows as IC champion and drew good numbers but less than Hogan. As WWF champion, regardless of his status as a heel or a face, Savage was drawing the same (sometimes a little more, sometimes a little less, usually equal) numbers as Hogan. Even a heel Savage vs. heel Bad News was drawing well on top, and some called for Savage to beat Hogan to build up a rematch and keep house show numbers strong with both guys headlining separate shows. If it worked, they'd have two groups on the road drawing A show numbers, if it didn't, Savage could drop the belt to Hogan at SummerSlam but Vince made the call to restore the status quo and make Hogan champion again, as had been the original plan.
After WrestleMania, Hogan and Savage hit the road for rematches and drew well, but Savage's power as Hogan's equal at the box office was gone, vindicating those who called for Savage to retain the belt. From that point on, it was back to just one touring brand doing Hogan-level numbers, as the b-shows fell to where they'd been prior to Savage's ascension.