Vito had a tough decision to make. He was right in envisioning that drugs ultimately "will be the ruination of us all." In real life, drugs and RICO have virtually destroyed what used to be the Mafia. But Vito should have seen what the Don of Cleveland said later: there's so much money in drugs that no one can resist. Not even Vito could have stopped it. And in the novel, Hagen thinks Vito's decision against Sollozzo was influenced by two emotional (or "moral", if you prefer) objections: drugs would be an "infamita," and Sollozzo used to be a pimp, and Vito was "notoriously straight-laced about sex."
So, my take is that Vito should have said yes, and tried his best to use his position as the most powerful Don to at least control the traffic and "keep it respectable."
Another mistake: After saying no, Vito took Sollozzo too lightly. Even if Hagen didn't warn him, Vito should have seen that Sollozzo, as a Sicilian, wouldn't take no for an answer. Instead of sending Luca to infiltrate the Tattaglias, he should have had Luca whack Sollozzo. He then would have had a good chance to make Tattaglia suck it up. The other families might have stayed out at that point--they got involved only when Michael's murder of Sollozzo and McCluskey unleashed big-time police crackdowns on them. Yes, Barzini was the guy who was really behind the Sollozzo deal, but if Vito'd had Sollozzo whacked, I think Barzini would have bided his time.
As for Sonny: Vito originally wanted Sonny to be a lawyer. He groomed Sonny as his underboss reluctantly. The novel makes it clear that Vito had no illusions about Sonny being able to succeed him effectively. It's an open question what Vito would have done if he hadn't been wounded, and Sonny killed. My guess: if he had his druthers, Michael would have become a political pezzanovante, and as "senator or governor," would have tried to legitimize Vito's gambling and union rackets. Sonny would have been the head of an ever-diminishing "illegitimate" "olive oil business."