What would be the use of denying them to start their own family? They were the Don's friends for years, it would simply be impolite to not let them form their families! That could also lead to them setting Mike up for assassination, as poor impatient Tessio did. Remember, "All I'm saying Mike is just take off the handcuffs." They were eager to be freed.
And of course there were plenty of business benefits as you lot have explained.
As for Tessio and Pete taking the blame for the five family massacre, that's not really relevant, the murders were pulled off so neatly that the police couldn't pin the blame on any of them. But they all knew it was Mike who organised the murder. They just had no evidence.
Justice is a very funny thing...