Calo did get smarter in GFIII than he seemed to be in GFII. He always worked for Don Tomassino. Michael went to Sicily under Tomassino's protection, who in turn paid for his bodyguards.

As for Appollonia, there i no question she would have been better for Mike than Kay who did nothing but whine about Michael's business (but didn't mind the lifestyle it brought), and tell him what an a**hole he was. Appollonia would have understood Michael, and perhaps through that she may have had the ability to influence him in a way that would have prevented him from becomeing the total paranoid he wa by the end of GFII.