TB,
I was always sorry that they changed the ending and omitted that scene between Kay and Tom. It has one of my favorite lines from the book. When Kay asks Tom why Carlo couldn't be forgiven, citing the many years that had passed, how he had become a better husband to Connie, etc., Tom looks around at the pretty New England scenery and says something to the effect of "Maybe in this world he could've been forgiven."

To me, that one line summarized how Michael and Kay came from two different worlds, a point well made in GF2.

As for Fredo, as much as his murder was the one sin that Michael couldn't live with, it was also a treachery he couldn't let go. As he says to Kay in GF3, he did what he had to do to protect his family. And Fredo, with his delusions about his abilities, would always be a danger.