There's much logic in what you posted. But, I think Vito would have taken a more tolerant attitude toward Michael:

The "legitimacy" Vito wanted for Michael was "Senator Corleone, Governor Corleone..." He knew this could never be because Michael became part of the criminal enterprise in order to help save Vito, then became head because of Sonny's murder. So, in Vito's reckoning, that path to "legitimacy" was closed to Michael because of the need to preserve Vito's family--physically and business.

The novel also tells us that Vito believed "a man has only one destiny." Vito said that of Sonny's choice of the Olive Oil business over law school (imagine: Sonny as a lawyer!). He'd probably take the same attitude with Michael. He might see Michael's abandonment of the Olive Oil business for wider horizons in the West and in Europe as a natural progression. He'd probably be proud of Michael's being knighted by the Church, and might see his selling the casinos and attempting to control Immobiliare as the best kind of "legitimacy" Michael could achieve under the circumstances. He'd also see Michael, despite his coldness, as a good family man, in that he apparently didn't philander, and tried to be close to his children. He'd have abhorred the divorce, but would have tempered his feelings because Kay had had an abortion.