If anything I think the verse on "m.A.A.d. city" after the beat change is him on dust - the way his voice is all high and twitchy.
As for the story, this is how I understand it after a few listens:
*SPOILERS I guess*
I'm not convinced that Sherane actually set him up, I think he just got caught up in the wrong hood and some guys beat on him for being on their turf. This plays into the "good kid, m.A.A.d. city" theme as he's just bein a good kid goin to see a girl, but the culture of the city drags him into some foul ****. The timeline on the album isn't straight forward and took a few listens to understand but IMO it goes like this:
Tracks 1-11 are set when Kendrick is around 17/18.
First half of Track 1 - Sets the scene of his relationship with Sherane, this goes on over the course of a few months
Tracks 2-6 - Really just sets the scene of Kendrick's life in Compton and him hanging with "the homies". Seens to happen over the course of an afternoon - his friends pick him up, they freestyle, they screw around for a while and think they are awesome.
Last verse of Track 1 - Kendrick heads over to Sherane's house
Skit at the end of Track 6 - Gets jumped
Tracks 7 & 8 are covering his thoughts to getting jumped
Track 9 - Goes back to the homies and they get messed up.
Skit/Track 10 - They go back to shoot the guys that jumped Kendrick, but one of the homies ends up getting killed
Track 11 - Kendrick regrets getting dragged down by the m.A.A.d city and vows to get out of it and inspire others to do the same.
Track 12 - This is Kendrick achieving his goal and is set in the present IMO.
Skit - "I'll be back in 15 minutes" - a throwback to the very start of the album - having seen how things unfold it adds extra power to this.