The Football League have agreed to let Leeds kick-off the 2007-08 campaign at Tranmere next Saturday, but hit them with an unprecedented points deduction for breaking the competition's stringent rules on insolvency.
Blackwell, sacked by chairman Ken Bates in September 2006 and now boss at Luton, refused to point the finger of blame at any one individual for Leeds' fall from grace.
But following relegation, administration and a summer of turmoil off the field he insists they will be a force next season and said: "I still think Leeds have the ability to get good players to the club.
"The name attracts players there and I think now with their share back they'll be able to sign some good players.
"It's going to be tough, there's no doubt about that, but I think they'll have the ability to get out of it.
"Leeds have a state-of-the-art training ground, fantastic fans, a good stadium and hostile support which follows you all over the country. Wherever you go it's a full house."
Reid, who lasted little over eight months as manager from March to November in 2003 when they were in the Premiership, admits the points penalty has left the club with a mountain to climb.
The former England midfielder said: "Like at any club they've got to start getting results on the football pitch.
"The 15 points deduction is a massive blow. They've got to be financially secure to allow them to get results."
He added: "But one thing they have got in their favour, and both Kevin and David know this, is that the support is fantastic.
"Knowing the Leeds United fans as I do, that's a major asset for the club. The support there is incredible."
O'Leary led Leeds to the semi-finals of the UEFA Cup and the Champions League during his spell as manager from October 1998 to June 2002.
The former Arsenal and Republic of Ireland defender feels Leeds should have avoided relegation from both the Premier League and Championship due to the quality of players in their squad.
O'Leary said: "I live in the area and one thing that the lads, both former managers, said there is that there is an immense fanbase.
"I don't think Leeds should be where they are. With the players they had in the Premier League I thought they should never have been relegated and with the players they had last season they shouldn't have been relegated.
"But 15 points now is a big call and for all their fans they've really got to get their act together."