I am not buying the argument that Vito was also not somewhat deluded. True he understood what he was, but he also thought he was doing good and helping others, and excused his crimes as a means to an end.
This is why he doesn't even think about committing violence against the scum who ruined Bonasera's daughter until he goes on and on about how he needed to come to him as a friend, someone who would invite his wife over for a cup of coffee and the rest. Same thing with Johnny Fontaine.

Vito wanted Michael to work for him, probably in some partnership with Tom Hagen -- i.e. not on the muscle end of the family. I think he thought he could use his political influence and his connections with labor to get michael into political office, which in turn he could use to strengthen the family. At first Michael wanted no part of it, but when he got in he got in all the way, and he could never get out, much as he wanted to.

If you look at the young, idealistic Michael, signing up after Pearl Harbor, getting a collegeeducation, wanting to teach, wanting to marrry Kay and live in New England or someplace far from the rackets and compare him to the self loathing monster he was at the end of GF II and the shell of a man he was at the end of III, he was indeed a tragic figure.