Is not hurting people with the truth, and not being able to refuse, a form of hypocrisy? And is distance from acts of obedience and abandoning the Dawn Prayer a punishment from Allah?

Avoiding confronting people with what they dislike is not hypocrisy; rather, it is a praiseworthy courtesy and tactfulness if it leads to a benefit or averts a harm. This is exemplified by the Prophet, peace and blessings be upon him, who, concerning a man, said, "What an evil brother of his tribe!" As for shyness that prevents one from fulfilling religious obligations, it is blameworthy and a weakness, not a legitimate shyness. One must be diligent in performing prayers on time, especially the Fajr prayer, because neglecting it is a major sin.