The story is symbolic. Mahavishnu didn't do anything BAD to Mahabali. Mahabali was a very generous person who offered to give whatever Vishnu, who appeared as the dwarf Vamana, wanted. All that the dwarf vamana wanted was 3 'steps' of land (measured with the feet). Mahabali was amused at this and said, "Are u sure, I could give more". Vamana said that would do and Mahabali agreed. Then Vamana started growing, and with one feet measured the entire earth, with the next feet, he took all the heavens. Vamana asked where he would keep the third step, and Mahabali who had understood by then that this was none other than God himself, bows down humbly and asks that Vamana place His divine feet on his head. This is symbolic of destroying the petty individual ego and thus Mahavishnu was in essence purifying Mahabali. Although the demon king was highly generous, he had the attitude that he was giving and so God came down personally to change that attitude and grant him immortality. He is still regarded as the best of kings by the Lord's grace and all of kerala regardless of religion celebrates the spirit of onam as being one of equality, love, happiness, peace and respect for all beings and mother Nature.
