As stated above the Corleones had deminished in their standing over the time since the Don's retirement. Furthermore, Mike had in many ways to potentiality of becoming great, but none of the olbvious earmarkings of one. He had made his bones, not done exceptionally well in carrying on the family business and wasn't involved in the life for a long time. It perfectly seemed that wasn't the appropriate sucessor to Vito.

What Tessio did wasn't unreasonable, he was talking to Barzini at a funeral, the perfect assumption by most people would be that he knows Barzini or is just socializing. The deductive mind of Michael, instantly knew the score and he wasn't fooled. He simply underestimated him. That's why the hits were so effective, Mike presented himself as less than he was, never showing his hand or striking until the time was right.

So it really wasn't stupid of Tessio, it was only stupid of tessio, as a high school student is stupid compared to a professor. Michael's intellect and cold, calm calculations were presumed by Tessio to not be existent, when in reality he used it to end up on top of it all.