Fredo probably knew that Geary was a regular at his brothel, but I doubt that their relationship involved anything more significant.

Though most of the dialog in that earlier script was omitted, it's logical to think that Tom might have been "sheepish" because he was likely the negotiator with Turnbull, and Geary pulled a switcheroo. And a sharp look from Michael to Tom would be consistent with the lack of confidence he'd been showing in the film to that point.
The line that Danito posted,"Mikey, sometimes the biggest crooks don't like to think of themselves as crooks," accurately states the attitude that "native Nevadans" had for "outsiders" in the casino business. If you saw "Casino," that's exactly how the County Commissioner (L.Q. Jones) treats Ace (Robert DeNiro) when Ace refuses to reinstate the commissioner's screw-up brother in law.