Is the long sentence okay?

I would make some changes. I would prefer you make it two sentences.

The isolation of China from the rest of the world was (use 'is' here. Your next statement uses 'is') less caused by the difference in ideology between United States and China (consider adding a period here), rather, it is the punishment inflicted by United Nations upon China as the result of (Add "the" as you are referring to a specific war)) Korean War, which was ignited by Kim Il Sung and further complicated by Mao Zedong's reckless intervention into it.

Thanks.
The rewritten version, according to your opinion, is as below:

The isolation of China from the rest of the world was less caused by the difference in ideology between United States and China. Rather, it was the punishment inflicted by United Nations upon China as the result of the Korean War, which was ignited by Kim Il Sung and further complicated by Mao Zedong's reckless intervention into it.

Would someone like to tell me whether any further improvement is needed?

It is correct grammar so only a personal opinion of style -- I would have included a "the" before Korean War.