Why did he say "Mechon Shivtecha"?
Malbim: Even when the primary place of Your dwelling is in Shamayim, and the Klal (nation) is not proper for You to dwell among them, You will turn to the Tefilah of the devastated.
What is "v'Salachta v'Asisa"?
Malbim: You will forgive the sin and do the request.
Why did he mention that Hashem knows what is in people's hearts?
Malbim: (a) You know whether or not he repented from the depth of his heart. (b) You know whether granting his request will cause him to depart from fearing Hashem. E.g. one might think that if he became wealthy he would do much Chesed and Tzadik, but You know that he would cease to fear You - in such a case, do not fulfill his request!