I think nobody knew that Rusty and Cathy were close, at least they acted suprised. When Cathy said she tutored Rusty and took him under her wing, that didnt seem to be common knowledge.
It's probably way more likely that Chads punishment was unrealistically harsh for a first offence, than Rusty surviving the fallout of that pic, if for no other reason than that the consequences of the pic were as public as it gets.
And as for the drug buisness, same rule as with all buisnesses, you first need a base of operation and even more so, when its smth as illegal as drug dealing. If Vinnie is behind it all, he is doing it exactly as he should. 1. Base of operation where he can conduct his buisness. 2. Taking out or discrediting the competition.