What is the step by step approach to redirect other people's packets
into my computer using Wireshark?
For this you need to poison the arp cache of target machine , as you are on windows you can use a very powerful tool CAIN for that , that you will be able to watch traffic
you need to add your PSK in wireshark 802.11 setting in preference list
WPA/WPA2 Enterprise/Rekeys
As long as you can somehow extract the PMK from either the client or the Radius Server and configure the key (as PSK) all supported Wireshark versions will decode the traffic just fine up to the first eapol rekey.
Eapol rekey is often enabled for WPA/WPA2 enterprise and will change the used encryption key similar to the procedure for the initial connect, but it can also be configured and used for pre-shared (personal) mode. Wireshark 2.0 (v1.99.6rc0-454-g1439eb6 or newer) is needed if you want decode packets after a rekey. that as you mentioned you have
How to prevent the man in the middle to capture packets from my
computer?
Add a static arp entry of your Local network gateway in your arp table , it will prevent you from arp MIMT for your outbound traffic
But with Client isolation and tempory keys poisoning is that that easy , you need to use a packet craft to posion other client by broadcasting arp using AP mac and gtk key for your broadcast encryption
Is it illegal to sniff other people's packets?
yes , it not a legal deed