FFC mentioned there was some gangster involvement in getting Pacino out of the movie he was shooting at that time, so he can play Michael in GF1. Does anyone know more about this?

The story you're thinking of had no gangster involvement. FFC had to overcome studio chief Robert Evans' objection to Pacino. But, when FFC finally prevailed, he found that Pacino's agent had signed him to be in MGM's "The Gang That Couldn't Shoot Straight," which would have precluded him from appearing in GF. Paramount's and MGM's lawyers argued for a week and reached a settlement: Pacino would be released from his commitment to "Gang" in return for Paramount releasing Robert DeNiro, who had been signed to play Paulie Gatto in GF. What a break! Impossible to imagine the Trilogy without Pacino; equally impossible to imagine DeNiro, killed off as Paulie in GF, returning as young Vito in II.

read Robert Evan's book "The Kid Stays in the Picture", he tells the true inside story of how he got Pacino out of the contract from MGM.

Pacino was supposed to do a movie with MGM "the gang who couldnt shoot straight", Bob Evans called Jim Aubrey (MGM president) and asked him to release Pacino from his contract. When Jim Aburey refused, Bob Evans called Sidney Korshak, the famed mob lawyer and secret owner of the Riviera at that time to settle the disagreement. Korshak called Kirk Kirkorian, owner of the MGM (who was building the MGM grand hotel & casino at that time) and threatened him with some union shit. Kirkorian agreed, Pacino was released from the contract, De Niro (who was supposed to play pauli gatto) was traded to MGM to star in the gang who couldnt shoot straight.