The separation you're talking about does not develop from the cradle, but you're right that it develops pretty early. Infants experience needs and expect those needs to be met immediately; their reality is entirely about what they experience and what they want. Small children begin to understand that their wants and needs will not always immediately be met (and sometimes react quite stridently to the realization), that they are competing with others (ditto), and that they will not always get what they want; they begin to understand their impact on others in terms of the consequence to them. From play with peers and their interactions with family, they begin to be able to predict and anticipate the feelings and reactions of others. By about 5 or 6, they should be able to anticipate how an action will make another feel - though learning to think before they act is still a challenge.

One not uncommon feature of the abuser is that he or she was often abused in childhood. It's extremely complex and depends on a lot of factors - the extent to which the abuser as a child found pleasure or pain in the acts, the extent to which the original abuser maked an effort to seduce and persuade rather than compel, the extent to which the original abuser rewarded desired behavior with attention and warmth, the age of the child at onset, etc., etc. The abuse most often makes the victim feel guilty, isolated, and mistrustful, but sometimes a victim will resolve the emotional conflict by identifying with and emulating his abuser - better the wolf than the prey. While most abuse victims do not grow up to be abusers, most abusers were themselves abuse victims.

It's not that they are completely incapable of empathy (that's a whole nuther set of disorders, and quite scary when you run into it), but that their interpretation of their victim's feelings is warped, partly by their own experiences, partly by their desires (humanity is quite gifted at rationalizing behavior).