Connie knew, and she says as much in GF II in the scene where she asks to be close to him. She says "I was angry at you" and she says she did things to herself (like whore around) to hurt Michael, but then she says she now realizes he was just being strong for the family and she says "I forgive you." Then she says "You need me Michael." And they make their peace.

I have said this many times before, but IMHO Connie has perhaps the most interesting character development of anyone in the three movies. She goes from Spoiled Guinea Brat to an assassin (of Altobello) and a Kingmaker and really the closest family advisor to Michael.