I agree with your 4th paragraph about how hard change is. People with these problems should still be considered responsible for their actions unless they can be shown (to within some reasonable margin of error) to be mentally incompetent, but we should be less hard on them than we are. A lot of people seem not to understand basic concepts related to mental illnesses, so there's probably also a lot of ignorance, confusion, and fear about addiction. Better local education would really help, and there should be more work and social opportunities for people who recover from addiction or reform after criminal activity.
I don't know whether or not everything is "here on earth to serve a purpose." That's a more general philosophical idea, so I'd have to think about it. ;)
Yes, drug dealers are responding to a need in the market, but because current governments have forced this to be a black market, a lot of the dealers are also doing things like assaults, murders, blackmailing, etc. Having moral qualms about this and not wanting to deal with it is understandable. There's also the fact that someone can sell something known to be physically addictive with the goal of getting people addicted in order to make more money.