So the Corleones public choice is either jabber with Barzini, or to turn a blind eye and give the impression that they've gone soft.
Exactly Pete. The novel makes it clear that to insure Michael's safe return to the US, Vito had to make the peace. Further, Vito's hugely explicit and dramatic statement that by swearing on the souls of his grandchildren he would not be the one to break the peace laid the groundwork for Michael being the one to break the peace on that future day of "reckoning". Of course, the novel makes it clear that Barzini has already broken the peace and that Michael, while seen by the Dons as intelligent, could never equal Vito's intelligence or cunning. Thus, he (and the Corleones) was not to be feared.
