If I've understood it correctly (I really don't know the bible at all) Jesus never spoke for an organised form of religion with churches etc. So how did the early christians especially the more "read" christians feel about the formation of the Vatican and the papacy?
The Popes have only lived in the Vatican sine 1870, just to clarify. It's only a palace.
I think you're imposing a modern idea of a centralized, hierarchical Papacy back 1700 years when it didn't exist. Back in the day before Christianity was the state religion of Rome, it was quite decentralized and Rome wasn't the center of the Christian world (but it was important). Local congregations would choose their own bishops, and the Pope was simply the Bishop of Rome then. Many Christians looked towards major centers of Christianity like Alexandria and Antioch for guidance, but again there wasn't a strict hierarchy back then. There was no bureaucratic, doctrinaire "Papacy" exerting its will on reluctant Christians.
But to touch upon Jesus and organized religion, the idea of Papal supremacy in religious affairs comes from Matthew 16:13-19 where Jesus calls Peter the "rock" on which he'll build his church. Peter is the traditional first Bishop of Rome, so thus all of his successors share in his preeminence.