I don't think that Kay fully grasped what Michael had become. Realize that when they are romantically involved, he has yet to commit murder, he was an outsider to the Family and has no desire to have anything to do with them. He makes that quite clear at the wedding. After he leaves her at the hotel, it is years before she sees him again, and she still remembers the young, idealistic college boy.

And unlike Carmella Soprano, Kay was raised in a totally different world. She probably wouldn't figure things out as quickly or easily, and it might have taken her a long time to truly catch on.