Slytherin wasn't wrong, if you think about it, it's just that times change. A thousand years ago, if you took some mudbloods and gave them magic power, and they didn't try to revolt or something, then being unwashed, uneducated masses, they'd be one of the cheering crowd members of witch burnings/drownings. So, they'd help muggles kill magicals. So turning them away, at the time, was self-preservation.