I've always thought that Fredo knew that it was going to be a hit on Michael. Maybe he had no idea that Kay and the kids would be included & maybe he in fact did know that Kay and the kids would be included. When he says to Michael in the boathouse scene that he had no idea it was going to be a hit he was lying through his teeth trying to appeal the brotherly connection in order to save his own skin knowing full well what the retaliation would be.

But that's just my 2 cents