In Season 5 when Angie thanks Tony for giving her the auto shop, she mentions that "they did a lot of other stuff out of here." and Tony quickly changes the subject. Mostly likely the shop did ok, but Pussy mostly used it as a front to justify his life style to the IRS.
Pussy probably got into heroin for the same reason all these guys do things they know they shouldn't. Because they're greedy and stupid. He saw an easy way to make big money, and jumped on it despite knowing the high risk.
If we believe "To Save from Satan's Powers" then Pussy had been a rat for several years prior to the start of the show. During that time the FBI would allow him to make a living, but limit how much they would let him earn. And the knowledge that it was only a matter of time before he went into "The Program" probably stressed him out about how he would take care of his kids.
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