Did the general populace know the dangers of over-use and addiction?
All this information comes from the excellent The Pursuit of Oblivion by Richard Davenport-Hines.
The first thing to note is that the view of opium could vary a lot, particularly depending on the class of the observer and the user. Also, the view of drugs and addicts was different to the view that developed in the 20th century. There was not such a separation between medicinal and illicit (this was developing by the end of the 1800s) or the same view of the addict as inevitably criminal and anti-social.
The dangers of over-use seem to have been well-known from at least the 18th century, although consumption (in Britain itself) during this period was mainly among the wealthy, and awareness might have been similarly limited. Samuel Johnson "regarded the drug as a useful friend but a dangerous master."
However in this early period there was no particular stigma attached to opium consumption. In small quantities it was a commonly used medicine and aid, and at worst controlled users might be viewed as self-absorbed and dull. Addicts were more likely to be pitied.
This view changed through the 19th century, particularly from the 1820s on. As Davenport-Hines puts it (this is the best summary of the topic I found):
"The possession of drugs for non-medicinal use was not subject to criminal prosecutions until the twentieth century ... Nevertheless at a time when neighbourly opinion remained a reasonably effective regulator of private behaviour (except in congested urban slums), drug usage began to be stigmatised as socially offensive. As early as 1814 opium was indicted as 'the pernicious drug' by a member of the English intelligentsia who had seen it ruin a friend... By the 1840s addicts were depicted in medical case studies as culprits 'incapable of self-control', whose self-centred, self-purchased curse could have no happy earthly end."
The use of opium (like alcohol) in Britain conflicted with the orderly, mechanical society that was developing in the Victorian era. It also picked up associations with lazy, effeminate Asiatics. (Although actual administrators in India often had a benign view of opium use.)
" Opium houses in the USA, Europe and Australia were represented as haunts of prostitution where Chinese men seduced middle-class white girls, and where white prostitutes went to turn tricks."
On the other hand, a report of a San Fransisco opium den by Lady Theodora Guest states:
"...It certainly was rather horrible; but in no way as degrading a sight as that of the ordinary European drunkard."
This period also saw the introduction of morphine and the hypodermic syringe, which overtook opium as the main medical means of pain relief. This in turn led to fewer medical opium addicts (and many more morphine addicts).
Although in the 19th century opium production and use in India and China became a highly contentious issue, and there were many lurid representations of the consequences of opium use, its use in Britain was not a major issue - probably because use was quite limited. In terms of numbers, certainly, by the end of the century morphine addiction was a much larger problem.
I only have a single source, but it is a fun read: CONFESSIONS OF AN ENGLISH OPIUM-EATER by Thomas De Quincey from 1821.
I'll add some quotes which would seem to indicate that opium addiction was known and that indulgence for the sake of intoxication was frowned upon.
As forestalling that question, and giving it a satisfactory answer, which else would painfully obtrude itself in the course of the Opium Confessions—“How came any reasonable being to subject himself to such a yoke of misery; voluntarily to incur a captivity so servile, and knowingly to fetter himself with such a sevenfold chain?”—a question which, if not somewhere plausibly resolved, could hardly fail, by the indignation which it would be apt to raise as against an act of wanton folly, to interfere with that degree of sympathy which is necessary in any case to an author’s purposes.
and
I have often been asked how I first came to be a regular opium-eater, and have suffered, very unjustly, in the opinion of my acquaintance from being reputed to have brought upon myself all the sufferings which I shall have to record, by a long course of indulgence in this practice purely for the sake of creating an artificial state of pleasurable excitement.