Sure there's alcohol in the movie. Many European cultures drink wine, etc with their meals during the day. It's accepted in many places outside of American culture.

I don't remember anyone beside Fredo abusing booze in the film. Carlo is a booze-hound in the book, but it's not really implied in the movie. Frankie and Deanna were drunk at the first Communion party. Tom has a drink twice to calm his nerves, once after Sollozzo tells him Vito was killed and then before Tom has to tell Vito about Sonny. Everyone else seems to be drinking responsibly.

As for Michael not drinking as often, that may have been due to his diabetes.