I'd like to weigh in here. I think that Michael hadn't made up his mind about what to do with his brother until after their talk. I think he believed that Fredo was "weak and stupid" and was probably misled. After hearing from Fredo's own mouth how truly discontent and angry he was about being "passed over" is, IMHO, when Michael decided that Fredo had to go. I think that is when he realized that Fredo's betrayal couldn't be forgiven or forgotten. Fredo's anger left Michael vulnerable to another betrayal, and that's what Michael couldn't risk. Then, he slowly bided his time until he had the perfect opportunity to kill him.