The lessons of the past with Tessio and Carlo definatly prove that anyone is capable of anything. Carlo, although a bastard was a brother in law and Tessio was one of the oldest of Vito's friends and confidants. Undoubtably MC suspects that anybody is capable of anything. I would argue that Fredo and anyone else would be the last people he would suspect. In GF I, he didn't even tell Tom Hagan everything he was planning, he clearly suspected anything was possible. Tom was his adopted brother and one of the most important family members, his father even trusted him.

Fredo was somewhat different, betrayal would require a certain degree of cunning. Fredo's was one of weakness, he succom to greed and envy. Still having someone of blood betraying him would still be ultimatly demoralizing and traumatic. I think he saw it as possible, but hoped it was totally improbible.