I agree with Last Woltz. Kay wasn't stupid, she was a champion self-deceiver. I don't mean that to be harsh on her--it's just that she was Michael's willing partner in his own self-deception. Just as he claimeded to be "legitimate" or "trying to be legitimate," she went along, wishing and hoping in his fiction.

And, Pete, recall the scene in GF when Michael returns to New Hampshire after Sicily to woo Kay. He told her he was with his father, then made an elaborte rationale about how his father was "no different than other powerful men with responsibilities..." Kay went right along with it.

I think that the Tahoe shooting pushed her over the edge because (apparently for the first time) Michael's criminal business threatened her and her kids' safety. Note the look she gives him after the shooting when she and Connie are cradling the kids. That was it, period.