I think he could still sing and dance, just not at the level he had set himself at prior. When you try to sing higher notes when dancing, its a lot harder, songs like Billie Jean, Black or White, Dangerous, Smooth Criminal, Man In The Mirror were kept in the same key. My point in bringing that up is that in Black or White, he's hitting the notes but its clearly a stretch for his voice- considering he wasn't doing much movement during that number and he was singing close to full out at times. Michael was always thin, In TII he looked about as thin as he did in the Victory tour (which was still really skinny albeit) but to say he was out of shape I feel is a stretch. He maybe wasn't able to run around the stage at a fast speed or do many crazy classic MJ like he did in the 90's but I don't think he was out of shape; I think he was just older.
Michael always struggled with singing and dancing at the same time as he got older, as evident with his choices of lip syncing over the years. In TII i have no doubt that struggle increased, but I think that it was more due to his age than anything. The drugs affect were more on energy and overall mental presence I feel like; whereas his age had the biggest impact on his ability to dance and sing at the same time.