Zero tolerance is easy and it works, but throwing out the baby with the bath water is never a good solution. I think that's what Harry was trying to say.
I think you're right on all points.
But the WC is just too short-handed now -- after the losses of the Ramp-War -- and doesn't have the resources to catch those babies. Before that, I think they were too blind, not seeing the issue in the proper perspective.
Would the modern WC -- with the lessons learned -- use the luxury of time & resources (they had in prior decades) to "catch those babies", if they had such luxuries today? No telling, I think.
Will Harry leverage the Paranet&c into an alt-White-Council, intercepting proto-warlocks with the much-more-numerous mortal membership? I honestly hope so, I think it's got a lot of fun potential; it'd be (or become) a spin-off series, I think); but again: no way to tell, until/unless Jim writes it (or WoJ addresses it, yea or nay).