Setting is definitely important, as is choice. One of the big problems with illegal psychedelics is that people aren't sure what they are getting. For instance, DOB and MDMA both come in pill form, but have wildly different effects.
Some of the worst outcomes I've seen have come when one drug is believed to be another, and this is something that decriminalisation would definitely help with.
That being said, psychedelics have traditionally been combined with ritual, and the lack of said rituals can be a big impediment to useful results.
Here in NL, large festivals have drug testing booths, where the visitors can have their drugs tested so they know what they'll be ingesting. That's possible because of decriminalisation and destigmatization.
Legalization would allow the government to create a testing infrastructure so drugs can be tested/validated before they're sold, that's arguably better. But it's definitely possible to create a safer drug environment with decriminalisation only.
Drug testing is possible here in the US with overt criminalization.
Decriminalization is just marginally safer. Testing is a huge waste of resources unless its a stopgap towards recreational legalization with a reliable supply chain.
Some of the worst outcomes I've seen have come when one drug is believed to be another, and this is something that decriminalisation would definitely help with.
That being said, psychedelics have traditionally been combined with ritual, and the lack of said rituals can be a big impediment to useful results.