We're never told that Michael was opposed to drug trafficking--he wasn't part of the discussion Vito had with Solozzo. Of course he would never permit the Family, even under Clemenza and Pentangeli, to actively deal drugs. But, since Vito agreed that he would provide police/political protection for drug rackets, and charge a fee, it's hard for me to imagine that Michael would walk away from that source of income--and leverage over other families. I think he might have been more realistic than Vito, who thought he could stop drug trafficking by refusing to provide that protection. As long as his NYC operation was doing what Vito agreed to, and as long as they were kicking back money (including drug protection money) to Michael, he'd look the other way.

I agree completely with Oli and Lou about the broader question of "legitimacy"--Michael defined it on his terms, which both eluded and deluded him, ultimately destroyed him.