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It was a different time back then. The fans were accustomed to faces going over in the big matches and Vince seemed like he was scared to mess with that. On the other hand, the NWA would almost always have the heel walk out with the belt. After awhile I think the fans just gave up on it. To kind of answer your question, I think they should have just waited until after Wrestlemania to do the heel turn and had the match at Summerslam.
Considering the year long buildup to Wrestlemania 5, I think Hogan going over in this match was the right decision. When you think about how this crowd was on this show, they NEEDED something to go home happy with, and a countout or a DQ would not have been a good decision at all.