One of the main reasons, the only one I can shed light on, was indeed nationalism. In particular, Slavic nationalism was a major issue for the Austro-Hungarian Empire in its waning years.

In 1908, Austria-Hungary annexed Bosnia and Herzegovina, primarily due to the fear that Bosnia would unify with Serbia, to create a larger Serb state. Austria-Hungary had a large number of slavs at the time, and was worried a strong pan-Slavic state would be a threat to Austro-Hungarian stability.

As you well know, the war began when Austria-Hungary began bombarding Belgrade, after its ultimatum was declined. Russia joined in, then Germany, etcetera. Austria-Hungary wanted a weak Serbia on its borders, and no strength in nationalism, and so when Franz Ferdinand was killed by a Serb, they showed little mercy.

During the war itself, nationalism from slavs intensified, especially throughout Austro-Hungarian campaigns in Serbia. The monarchy finally collapse in 1918, under intense pressures.

The reason that the states broke up, was because nationalism was still on the rise in the region, and national identities were allowed to take hold. One of Woodrow Wilson's fourteen points was focused largely at the fallout from the Austro-Hungarian Empire, in allowing all peoples self-determination for governance. So, a pan-Slavic state was created (The Kingdom of Yugoslavia), and Austria-Hungary broke apart into Hungary, Austria, etcetera.

I hope someone can shed light on other aspects of the dissolution more than I can.

You might be interested in a very similar question with exellent answers from last month: Was the Austrohungarian Empire doomed to failure?

As for the follow-up, the dissolution was mostly due to nationalistic forces already having proclaimed their independence and the Treaty of Saint-Germain-en-Laye between the Allies and Austria mostly forced them to accept these new countries and their territorial borders.

Hungary proclaimed their independence on the 16^th November 1918 after the Aster revolution and founded the Hungarian Democratic Republic under revolutionary leader count Mihály Károlyi. On the 28^th of October the National Council in Prague had already proclaimed the First Czechoslovak Republic and on December 1^st a delegation of the newly-formed People's Council of the Slovenes, Croats and Serbs delivered a proposal to Alexander Karađorđević, regent of Serbia and Montenegro, to unite under his rule, which is essentially the birth date of the Kingdom of Yugoslavia.

In the peace treaty signed in September 1919 Austria had to agree to acknowledge these new independent nations. Only a small part of the territories were taken for the victors themselves. Romania received the Bukovina, Galicia and Lodomeria went back to the re-established Poland and the Italians took the Austrian coastline and the German-speaking South Tyrol for strategic reasons. And finally, Austria had to cede their tiny little prestige colony of Tianjin back to China.