I used to own an events management company and we did an enormous amount of leaflet delivery and flyering, with a reasonable ROI. That said, leaflet distribution isn't appropriate for every business. I've owned several different businesses and I certainly wouldn't have used blanket leaflet distribution for all of them. If you are willing to give it a go and track the results, it might well prove to be a useful arrow in your marketing quiver.
Leaflet distribution can work wonders for certain businesses. However, as you are discovering, there are a lot of things to consider when setting up a successful leaflet distribution campaign. The law can vary from council to council in terms of distributing flyers in a public place (Flyering). I have done this in some areas with the blessing of the council and I have the local police move on my team in another area, threatening to issue a fine for littering as people often tend to simply drop the flyers on the floor. The only way to know for sure is to ask the council in the area where you are going to distribute the flyers. Then at least you can say you have asked permission if challenged.
One tip, especially in the litigious society that is modern Britain, is to be very careful about putting flyers under windscreen wipers. We had a small claim against us for damage allegedly done to an individuals car by our distribution team and we never bothered doing that again. Ultimately, flyering works best when you are a bit discriminative about who you give flyers to. Tightly define who you want flyers handed to and, if your team keep to your guidelines, watch your ROI jump up.
No such problems with door to door distribution. However, unless your product has almost universal appeal, you will get a poorer ROI from this as it is much less targeted than flyering.
The only way to be able to effectively manage a leaflet distribution campaign is to measure response. I personally think the best way to do this is by having a unique call to action. In other words, have a telephone number or e-mail address specifically for this campaign, or an offer unique to this campaign. Only that way can you have an informed idea of your ROI. We would do a campaign review with our leaflet distribution team at the start of every week. If they are motivated, they will want to know the results of their efforts. They will then know if they need to change their approach or if they are doing well (for which there might be some kind of bonus).
Good luck in your efforts. I know that leaflet distribution has fallen out of favour in recent times, but direct marketing done right still works.