Did the Valar make a huge mistake?

[obloquy]

You bet they did.

Are you going to provide an argument to support this?

The text you quote was as the Valar debated going to war against Melkor, not the summoning of the Quendi to Valinor. After the Battle of the Powers, Melkor was imprisoned in Mandos -- the Valar's job was done.

The Quendi were summoned, not because of Iluvatar's counsel to Manwe, but because...

the most part feared for the Quendi in the dangerous world amid the deceits of the starlit dusk; and they were filled moreover with the love of the beauty of the Elves and desired their fellowship.