I'm not paulieb, but I'd like to post a theory. My apologies for its length; but since I'm fairly new, I didn't get the opportunity to discuss this 3 or 4 times as others who have been members for years have been able to do. So I guess you could say I'm making up for lost words.

I read the links Don Cardi provided, hoping that my theory would be original and that no one else submitted it in the past. Well, darn, a couple of people did -- but I have some extra points to add. Here goes:

If we trust that Michael's hypothesis (voiced to Tom) is correct and was inserted by FFC to show Michael's intelligence and sharp antennae ("... unless I'm very wrong, they're dead already, killed by someone close to us, very afraid that they botched it"), then I think it backs up the following scenes/implications:

(1) How would the gunmen know that they "botched" it -- that Michael was still alive -- within minutes? The gunmen themselves would be on the run. Someone else with an interest in the proceedings would have to be close at hand to check the result. The first person we see on the scene is Rocco. The alarms have just been sounded when Rocco arrives at the house and sees Michael outside, making him the first to know that the hit has failed. His first words are "They're still on the property. Stay inside, Michael."

(2) When Michael orders Rocco to capture the gunmen alive, Rocco replies, "We'll try" -- a hint that he knows he will have to kill them.

(3) With Michael staying indoors as Rocco told him to, Rocco is free to lead the search unsupervised. Rocco has the opportunity to kill the gunmen without being seen. How?

First, he disperses the other searchers: We immediately see him giving orders for them to go to various sites around the compound.

Second, with his subordinates elsewhere, Rocco is free to head right for the drainage ditch. And how does he know he will find the assassins there? Because I think this is the planned escape route. We find the two dead men right at the mouth of a large sewage pipe (drainage pipe, culvert ... whatever you call it). Could this not imply that the sewer system is the conduit through which the would be-killers planned to escape the compound? At least the one pipe I saw was large enough for a man to crawl through.

(4) How does Rocco manage by himself to kill two men armed with machine guns? I think the only way this can occur is if the gunmen were approached by someone they trusted, which would be the case if Rocco were their co-ordinator or "insider." A knife is easily hidden -- up a sleeve, in a pocket, wherever. Rocco could simply be talking to them or instructing them one minute and whip out the knife the next, before the hit men could even aim and shoot their weapons.

Also, I think that the hit men are doomed regardless of how Rocco attempts to kill them. Defending themselves with their machine guns is out of the question, as the noise would attract the other searchers right to their location.

(5) When Tom Hagen orders Rocco to get rid of the bodies, Rocco looks around and asks, "Where's Mike?" It may be insignificant; it could simply mean that Rocco is taken aback by getting an order from Tom, since he doesn't know yet that Michael has made Tom temporary Don.

But I suppose one could also theorize that Rocco wants to gauge how closely Michael is watching him. Note how Rocco seems to take a special interest in the assassins' guns. If Michael is on Rocco's tail, observing him like a hawk, that could indicate that Michael has suspicions about him already, which Rocco wants to avoid.

(6) I think it's plausible that Rocco could have opened the drapes to Michael and Kay's bedroom. He and Al have access to the house -- in fact, they have a fair bit of freedom in it, in my view. (Isn't one of them allowed to take Connie upstairs to one of the bedrooms of the NY house at the end of the 1st GF?) Rocco sits in on Michael's meetings, whether in his office, in the boat house, etc. At an early point in the film, Michael even tells Senator Geary that "I trust these men with my life."

(7) I think one of the most telling segments, though, is a cinematic one; and it occurs at the end of the film. In Godfather II FFC employed several scenes that parallel the first Godfather. For instance, both movies open with a lavish celebration during which the Don is holding court and hearing requests.

At the end of the first Godfather, the Don has his enemies and betrayers killed: Tessio, Carlo, Moe Green, the heads of the rival families. Likewise, there is a similar rash of killings on behalf of the Don at the end of Godfather Part II: Frank Pentangeli, Fredo, Hyman Roth ... and Rocco. Why is Rocco killed? I believe he is killed because he is also a traitor. By the end of GF II Michael has put two and two together and surmises that Rocco must have been involved in the Tahoe shooting.

I believe the meeting scene near the end (among Michael, Rocco, Al, and Tom) seals Rocco's fate. Michael is harshly critical of Tom because Tom didn't confide a job offer to him. Michael is testing the loyalties of his inner circle, and perhaps Rocco's presence was a deliberate move by Michael to illustrate how he demands absolute fidelity.

Of course, Rocco's other reason for being present is to receive his orders to kill Hyman Roth; and whether he refuses or accepts this mission, it is a death warrant. If he refuses, his loyalty will be in question and Michael would likely have him killed anyway. If he accepts, which he did, the FBI surrounding Roth will surely turn their fire on him. I believe that Rocco chose what he thought was the lesser of two evils: There was a chance he could survive the FBI shooting and then make a "deal." (And even if he didn't survive, as was the case, at least he knew the time and place of his death and that it would be a quick demise.)

None of this means that Rocco and Fredo were in cahoots, or even that they knew about each other's role. Roth/Ola may have approached each man separately.

However, I do have a problem with my theory straight off the bat: If Rocco was in on it, telling the shooters the site of Michael's house, the location of his bedroom, the way to sneak onto the estate... then what was left for Fredo to do that made him a traitor also?

As Don Cardi's links indicated, we just can't seem to come up with a perfect argument for who shot the shooters...