I think Connie must have realized that Fredo really was a traitor and a danger to Michael--and in any event, Michael was her meal ticket for the rest of her life at that point. Michael probably sensed that Connie was accepting his rationale for killing Fredo, which probably helped him deal with his own conscience.
Two points...
1. By III Connie saw that Michael was slowing down, and she showed her strength (if not good judgment) by ordering the killing of Joey Zasa.
2. We get a glimplse into Connie's total loyalty to Michael when she expresses surprise that he went to confession. She is really shocked that Michael would tell his secrets to a "stranger." When Michael tells her Lamberto was a "real priest" the next thing out of Connie's mouth was something about "poor Fredo" drowning. In other words in one sentence she tows the "party line" about the cause of Fredo's death and acknowledges that Michael's guilt can be assuaged by his having confessed his sins.
