I believe that Vito said no to drugs because, as he stated, he had political/police power and they would also be morally against drugs. By him condoning it he would lose out either in connections outright refusing to deal with him, or heavier bribes to get them to look the other way.

I also believe that, if he had said yes, we would have gotten the same result only down the line when the Corleone's power was weaker. Barzini could have stepped in to pick up the connections that abandoned Vito due to his going in on the drugs (after all, he was a silent partner and nobody knew he was backing Tattaglia and Sollozzo), and later on he could have had even more power.