It would have been easy enough for Gus to have thrown Malvo's pistol on his lap before he called the cops. I don't remember seeing it next to the briefcase when Molly listened to the tapes, maybe that's how he found out the tapes existed in the first place. Either way, if they thought a retired cop found Malvo, checked out his hideout, and when confronted by a dangerous killer, shot him, yeah, he'd get a citation anywhere...
Gus also said "the green thing" (or something like that - it was a bit imperceptible on the rewatch). Malvo asked Gus when the cops thought he was a preacher and let him loose, "why can humans see so many shades of green". Molly answered it later at the diner.
Remember Gus DID redeem himself, followed up and arrested Malvo. His Lieutenant and Chief Bill cut Malvo loose even AFTER seeing the picture of him from the security camera. I don't think we can blame Gus for all the following violence between the stop and his subsequent arrest. (I don't think anyone actually was killed in between the traffic stop and the subsequent arrest except the dog)
I can't hang any of the rest on Gus - he tried to arrest the guy and was denied based on lack of evidence.
Malvo was casing out Gus' apartment and told the neighborhood watch guy he knew what floor Gus lived on and that he had no security system. Basically, I know where to go, how to get in, and do whatever evil thing I wanted to do. The threat to Greta was implied in the conversation...