From the moment Leo left La-Lakoosha to pursue power and up to the point where Lunatea's Veil starts, The King of Sorrow managed to take advantage of Leorina's desires and greatly influence her actions (but not fully take over).
Leorina was still herself, just heavily swayed to work toward the King of Sorrow's goal. Hence, she didn't know Baguji was merely a puppet that the King of Sorrow used to move about Lunatea, and that's why she mentioned that Baguji was out running errands when she removed her disguise of him.
This influence was broken when Klonoa defeated her as Cursed Leorina, as her eyes before then were dull and lifeless, but after the battle, a shine returned to them.
I believe Leorina transformed into Cursed Leorina because of the great power of the elements. When the King of Sorrow was influencing her, that counted as her having the Element of Sorrow in her possession, which, with the other four Elements, retained a balance. However, just before Leorina fired a wind bullet at Klonoa, the King of Sorrow dropped his influence over her and immediately shattered the elemental balance, causing the power to overtake and transform her.