Ab initio calculations employing the configuration interaction method including Davidson's corrections for quadruple excitations have been carried out to unravel the dissociation mechanism of acetylene dication in various electronic states and to elucidate ultrafast acetylene-vinylidene isomerization recently observed experimentally. Both in the ground triplet and the lowest singlet electronic states of C2H2(2+) the proton migration barrier is shown to remain high, in the range of 50 kcal/mol. On the other hand, the barrier in the excited 2 3A" and 1 3A' states decreases to about 15 and 34 kcal/mol, respectively, indicating that the ultrafast proton migration is possible in these states, especially, in 2 3A", even at relatively low available vibrational energies. Rice-Ramsperger-Kassel-Marcus calculations of individual reaction-rate constants and product branching ratios indicate that if C2H(2)2+ dissociates from the ground triplet state, the major reaction products should be CCH+(3Sigma-)+H+ followed by CH+(3Pi)+CH+(1Sigma+) and with a minor contribution (approximately 1%) of C2H+(2A1)+C+(2P). In the lowest singlet state, C2H+(2A1)+C+(2P) are the major dissociation products at low available energies when the other channels are closed, whereas at Eint>5 eV, the CCH+(1A')+H+ products have the largest branching ratio, up to 70% and higher, that of CH+(1Sigma+)+CH+(1Sigma+) is in the range of 25%-27%, and the yield of C2H++C+ is only 2%-3%. The calculated product branching ratios at Eint approximately 17 eV are in qualitative agreement with the available experimental data. The appearance thresholds calculated for the CCH++H+, CH++CH+, and C2H++C+ products are 34.25, 35.12, and 34.55 eV. The results of calculations in the presence of strong electric field show that the field can make the vinylidene isomer unstable and the proton elimination spontaneous, but is unlikely to significantly reduce the barrier for the acetylene-vinylidene isomerization and to render the acetylene configuration unstable or metastable with respect to proton migration.