It's better to be vile in fact than vile in reputation when one's pleasures are natural; I refuse to justify myself to those whose perception is corrupted by their own moral failure.
The opening presents a startling logic: better to be vile in fact than vile in reputation when that reputation is false. The argument is that one's actual pleasures and frailties matter less than others' perceptions. But the perception of others is not objective reality; it's contaminated by their own 'false adulterate eyes' and 'frailer spies.' In this economy, internal integrity (being vile but knowing you're vile) is superior to external reputation.
The sestet's central claim—'No, I am that I am'—echoes God's declaration to Moses ('I am that I am'). It's a claim to essential selfhood beyond judgment. The speaker refuses to 'show' his deeds by others' 'rank thoughts.' Instead, he turns the tables: if everyone judges everyone else as bad, then 'All men are bad and in their badness reign.' The sonnet ends by rejecting the entire system of moral judgment that has sustained the Fair Youth sequence.
You're doing something you know is ethically ambiguous or even wrong, but you're tired of apologizing. So you just own it: yeah, I'm doing this thing, and I don't care if the people judging me are actually worse. It's pure self-assertion.