I always figured that it was the moment Fredo explodes with rage about having been passed over. I even think you can place it to the exchange - and here I may paraphrase

Michael - that's the way Pop wanted it

Fredo - Well, it ain't the way I wanted it.

In that one exchange Fredo isn't just challenging Michael's right to rule, he's challenging Vito's. Thus, Fredo demonstrates that he has a dangerous ambition that surpasses common sense and the laws of respect for both Dons.

And that if he's got enough anger to do that, he might well do it again. I doubt Fredo ever realised he'd done it, I doubt it was a concious thought, just a moment of uncontrolled anger that revealed his unconcious desires and frustrations that would continue to fester below the surface.

warmest regards

dave