I'm not sure what the answer is, either, but I am convinced that legalization is NOT it. Cigarettes and alcohol DO wreak havoc on our society and the people in it, both those addicted to them and those who love them, and IMHO, that fact is a strong argument AGAINST the legalization of additional addictive substances.
Legalization MAY reduce costs of the drug war, but it would also increase social acceptability, leading to more people trying the substance, liking the substance, and becoming addicted to the substance. Costs saved on the drug war would lost somewhere else - the waste of human life and potential, and the emotional wreckage of addiction radiating out from each addict onto all those who care about him. Having watched the devastation of addiction in my own life and how far its tentacles reach from just a single addict, and having read numerous posts by the devastated folks on SR, I could never be in favor of legalization of any additional drugs. As a society, it would be irresponsible to implicitly condone drug use by legalizing it, IMO.