I can see him casting De Niro as Michael, since he loved working with him on "Once Upon A Time In America"
Considering Leone turned it down to make his own gangster movie
Without getting into speculation about where Leone takes the storyline (we could be here forever doing that), I have a couple of broader questions in my mind:
The easiest one to answer: did the active gestation period for OUATIA really begin in the same timeframe?
Much more difficult: how capable was Leone of doing The Godfather to order, on schedule, for a major Hollywood studio? The book was a serious commercial property, and it wasn't at all obvious that it could be adapted into a movie by an auteur.
Also, as I've mentioned before in another Leone thread, I think he was burned by the critical reaction to Once Upon A Time In The West.