He is saying he always wanted out of the crime business and wanted to be legitimate. Let's not be fooled my Michael... he clearly didn't want out of the business at all, even by the end of Part III until Mary was killed.
I think many see this incorrectly. He didnt really want out? Why because he didnt go legitimate all at once. It would have been suicide for him to take his fingers off of some of the strings. Going legitimate for the Corleone's REALISTICALLY would have taken atleast one full generation after Michael. Thats why he wanted Tony (he throws away greatness).
Slowly, one by one you cut the strings from the puppet masters hands. Not all at once. You are then exposed and vulnerable.
I agree. Not only did Michael want out, he never wanted IN. If Michael hadn't taken over after Sonny was killed, the lives of his entire family would have been in danger. Even with the murders in the restaurant, he did them not because it was the easiest path, but because he felt it was the only was to save his fathers life. I'm not saying I agree with his actions, but I can understand how he got there.
The psychology of the situation once those first murders occurred is interesting. It could be argued that his experiences in the war enabled those actions (the murders), and that once they were committed, further crimes were made easier through both the damage to Michaels opinion of himself (not through a 'like' of the business). Throughout the Trilogy he does seem (to me at least) to be very aware of his own 'tragedy'. In the end it is his intellect that destroys him; he is acutely aware that he has betrayed his own morals, and that is possibly the most damaging factor to his psyche. It is made very clear in Pt III that he doesn't see himself as redeemable.
He is also very, very, very paranoid, and justifiably so. By the time he's really in deep, he thinks that if he doesn't kill his enemies, they'll kill him. He's probably right. The conflict comes with his increasing inability to distinguish between threats to his and his family's safety, and threats to his power base. He feels the need, therefore, to assert control over everyone. Quite honestly, the only person who ever comes out on top of Michael is Kay.
The old adage is true: Absolute power corrupts absolutely. Michael does want out. That doesn't mean that, psychologically, he's capable of it, however. By Pt III, his need to control and his paranoia is so extreme that he simply can't let go.
