From a story structure standpoint, Vito is in no way shape or form the lead. This is simply industry respect and politics. Forget screen time, measuring that is pointless. Red has the most screentime in Shawshank but Andy Dufrane is very clearly the protagonist of that story. Theory wise (and in practice), the best way to identify the protagonist of a story is to see which character has the strongest desire and acts on it. Now, they doesn't necessarily make them the lead too, but in the case of Michael/The God Father it does.

The reason he was nominated for best supporting is the same reason Timothy Hutton was put up for best supporting actor in Ordinary People when he was very clearly the lead there as well.

The academy/industry has a habit of pushing an actor to supporting when nominating because they think they'll have an easier time winning that category or because they have another actor in the film they'd prefer to nominate for best actor. It's that simple.

Walter White would both love and hate Breaking Bad depending on which season Walter White he is.