Of course he never intended to tell her the truth. Michael was always lying to Kay about his busiess and how close he was to legitimacy just to get her off his back. Since the film did not go into the whole New Hampshire business, let alone Kay's conversion to Catholicsm (which BTW may have made certain partsof the plit of GFII impossible) , we are left with Kay fetching a drink and seeing Clemenza, Rocco and Neri come in and pay tribute to their new Don, and unceremoniously close the door in her face.

She was no idiot. She knew he killed Carlo, but chose to cover the moon with her hand, perhaps believing she could change him, or perhaps just staying in some state of denial the way wives of abusers and alcohlics do.