Yes, Connie was the protector of this family fiction. I have posted many times that she is possibly the most interesting character in the trilogy because she changes from a "spoiled guinea brat" to a tramp, and eventually she becomes the true matriarch of the family, responsible for the hit on Altobello and responsible for the succession to Vincent (she also ordered the hit on Zasa).

I think Kay knew that Michael killed Fredo, and when Anthony finally went to live with her he told her about how he was called out of the boat at the last minute, ans then Kay probably told him that Michael arranged the whole thing.