As it was a lazy summer Friday afternoon with my roommate out of town, I had to find something only vaguely work-ish to work on, so I decided to look into the etymology of awful. (Who says grad students don’t know how to have fun?)
A little background on this: back in high school, my best friend and I attempted to work a backhanded compliment out of awful by saying that certain things made us “full of awe” — things like *NSYNC, reality TV, and so on; things that most decidedly did not fill us with awe, unless “awe” is taken to mean “vomit”. Of course, it was a failed venture, because statements like “Your artwork is full of awe” made no sense yet were pretty transparently insulting. What I’m trying to say is that using “full of awe” did not reduce the number of beatings we received for our snide commentary.
But this little language game danced around a bigger question: why is something bad described as awful, while something good is described as awesome? Why is some awe good, but a lot of it bad? The answer, I assumed, lay in the history of the English language, and so, given an afternoon to myself, I engaged in my standard pastime of reading the Oxford English Dictionary.
So here’s the story. As it turns out, awe originally meant fear or dread. That’s an archaic usage now; as the OED puts it, “From its use in reference to the Divine Being [awe] passes gradually into: Dread mingled with veneration, reverential or respectful fear”. This in turn changes into “solemn and reverential wonder, tinged with latent fear,” which most closely approximates my personal take on the modern meaning of awe.
Since the meaning of awe was changing, the meaning of word derived from awe depended a lot on when they were derived. Aw(e)ful entered the language fairly early on, while awe still was predominantly a type of fear, whereas awesome came along later (around the turn of the 17th century), after the dread had mostly filtered out of awe. That said, each of these adjectives has been used where those of a modern inclination would use the other, which leads to some rather surprising sentences:
(1) His truth, His awful holiness. 
(2) Together did the awesome sisters cry. 
Unfortunately for my purposes, awful means “respectable” far more often than awesome means “dreadful”, so I can’t very well go around calling things “awesome” strictly to demean them. But one could go along calling awesome things “awful”, without distorting modern usage too much.
Anyway, this is etymology, which I generally consider outside the purview of grammar, and which I generally shy away from posting about because bradshaw of the future already does it so unfairly well. But when such a neat story like this one falls in your lap, you can’t keep it to yourself. Such is the beauty of language and language change.