After the Opium Wars the European powers started grabbing territory in China (the Germans in Shandong, everyone in Shanghai, etc.). England largely was looking for trading bases and was not primarily concerned with expanding territory (though that was not true of all of them). Many imperials did try to resist European encroachment, and many more were too busy getting rich off of it. When there were riots and anti-European uprisings (the Boxer Rebellion), the Empress Dowager Cixi supported them.

There was indeed opium abuse in China before the British, but it wasn't quite as widespread. The British believed in trade at all costs, and because of the imperial edicts forbidding the sale of any Western goods in China, the traders used opium to balance the flow of silver. Oddly enough, the amount of silver flowing into China before the rise of opium smuggling was creating a terrible amount of inflation in China. Of course, at its peak, the opium trade was pulling a fair amount of silver out of China.

Water was the reason the British chose to pull out of Hong Kong. The island of Hong Kong was ceded to them permanently after the Opium Wars. Kowloon and the New Territories, however, were granted to them on a lease to alleviate the problems they had getting sufficient water on Hong Kong Island. Without water from across the harbor, Hong Kong could not support even a fraction of its population. Furthermore, even if the island could have bought water from the Kowloon side after the lease expired, it would not have been expedient. The two sides of the harbor were too inextricably linked to be effectively seperated again. Oh, and China didn't seem likely to renew the British lease on the New Territories.

Well, that's my take on matters, at least.