In my opinion, the flashback scenes are necessary to an extent, but could be modified slightly. I do believe it is (1) fun to see how Vito got his power, especially when performed by a wonderful actor like Diniro, and (2) illistrate some measure of contrast between Vito and Michael.
I agree that some viewers may see Vito as a sort of good guy who only wants to live in peace (and influence), but at the same time they really show the viewer what Michael is becoming; Vito is this sort of Klingon guy who is super honorable and all about justice (note this is all in relative comparison, he's certainly a criminal), but Michael is becoming this cold sith lord who kills his own brother and is super paranoid, which results in his sort of splitting himself in two.
Anyway, I do believe that the flashback scenes were necessary, if nothing else than for the contrast and the relevance to each other, and that good writers will distinguish certain characters even in a bad arina; goes to show that are few if any absolutes when it comes to humanity.