Fredo was one such individual that was not really fully cut out for the Cosa Nostra. He didnt' have the cunningness, he was too trusting and his slip up in Havana at the superman club was more a testiment to this.

Fredo was always more of less on the level, in terms of truth, mainly due to a lack of cunning and calcualting intellect required to be a Mofioso. This slip up is definatly in the parimeters of his character. He was stupid. Stupidity does not necessary as I want to point out connotate a lack of intellect, but a lack of use of intelligence as is a more common usage:

stu·pid ( P ) Pronunciation Key (stpd, sty-)
adj. stu·pid·er, stu·pid·est

1) Slow to learn or understand; obtuse.
2) Tending to make poor decisions or careless mistakes.
3) Marked by a lack of intelligence or care; foolish or careless: a stupid mistake.
4) Dazed, stunned, or stupefied.
5) Pointless; worthless: a stupid job.

I never regarded Fredo as particularly stupid, but I did regard him as having more or less an average joe mentality, and not having the cunning or any extraordinary mental quality like ambition that would make him a good or efficent Mafioso. But I would like to point out he did have charm, was great with the women, was good at the casino and the club business, so he did have his talents that clearly marked some level of intellengce.

I think what Michael means by Stupid is usage is more 1 & 2 and 3, but only 3 in terms of a his carelessness and pension for making stupid mistakes.