The conventional wisdom is that Vito wanted something "legitimate" for Mike, and even he tells Michael this at the end of his life. I wonder, however if this really was his wish. In the beginning of GF, there is the scene with Kay where Michael goes on about how he is not like his family, and there is the deleted scene where Vito makes it clear that he wants Michael in the fold.
What I am wondering what Vito's state of mind was at the point he knew Genco would die. First he had to be very aware of his own mortality, and that he was nominally going to pass the torch to Santino. While nepotism had something to do with Vito naming Tom Consigliere, I also think he did it to use Tom as a person who could keep Sonny from cutting off his nose in spite of his face.
But in truth, after Sonny died because of his temper and Tom's inability to control him, he is not especially surprised. When he announces that he never thought Tom was a bad consigliere but that Santino was a bad Don, he is not exactly sending anyone a news flash. He is just saying what everyone already knew.
I make these points because Vito was no fool. He had to know in advance that Sonny was not going to be a worthy heir, and I believe in the back of his mind he always really wanted michael to be his successor. With Michael in the family business, perhaps Vito, had he not been shot, would have figured out a way to allow Michael to take control of things using Tom as a kind of go between to keep the Michael Santino relationship smooth. In other words somehow allow Santino to think he was running things when he really was not. This would have meant Michael would not have had a career in politics, or as a union leader as some have suggested, but instead something closer to "home." Thoughts?