I could be wrong but I suspect that legal drugs would have strict limits on potency and very high taxes resulting in a good environment for black market goods.

Yeah, you're obviously right about that. But in my crazy scenario where the Government actually does the right thing and legalizes drugs, it does the whole-hog thing and just lets the market regulate it self. Let's be honest, at this stage, both scenarios are entirely impossible. The only thing we might, might, see in the next 5 years is some kind of decriminalization of marijuana at the Federal level... with most states keeping it illegal in most cases. 

the usa has the capabilities to easily destroy the various drug cartels they just refuse to commit the resources to protect our borders

Legalize drugs and educate people about them will help. Building a bigger fence won't, unless you build it around the entire coast line as well and thoroughly inspect every truck, container, and person crossing the border. Trade would come to a halt.

For example Extacy. Sasafras oil is being harvested in Cambodia, send to The Netherlands for manufacturing and comes into the states after being shipped to Vancouver by container ships.
4 countries are spending a lot of money to try to stop this but the profit margins are just too big. The only result is speeding up the process of deforestation in Cambodia, the more harvests are being intercepted, the more trees are cut down. The same thing happens with illegal Marijuana grow ops in California, they're not going away no matter how many you burn down.

All that energy spend on combating drugs that aren't even harmful if manufactured and taken with care.

Illegal immigration is a lot harder to solve. Again the best solution is to combat the cause. Why do people flee their country? Either they're afraid for their lives or can't sustain themselves properly. Increase free trade with Mexico, help the government fight corruption to make Mexico a more desirable place to stay. Taking the money out of the drug cartels by legalizing drugs will also help lessen their grip on the country.

Steal their woman. With no women, they cant reproduce..

It would be easier to just legalize drugs.

Then we could actually fill up our jails with real criminals, the cartels would crumble, and we could tax the shit out of drugs.

At a minimum they need to legalize marijuna. The laws ruin more lives than the drug itself.

It's funny working at a convience store and just seeing how many "blunt wraps" we sell a day, let alone singal cigars meant to be opened up and mixed with marijuana.

Last part... at least in most places.

Essentially a glass "bowl" for Marijuana can be claimed as a tobacco pipe up until it has marijuana residue in it.  Then it's "Drug Paraphenalia."

Essentially cops hope that unaware stoner employees use the store merchandise.

Really as far as the law goes i'm surprised it's one that sticks though cause it's a silly distinction.