Michael certainly felt remorseful about ordering Fredo's death, and I think his emotion while confessing to Cardinal Lamberto was genuine. But I don't think he belived that killing Fredo was a mistake. I think the depth of resentment Fredo showed in the boathouse scene convinced Michael that he would have been a danger to Michael and his family all of his life.

To me, the moral issue comes down to the life that Michael chose. He constantly put himself in the position of having to use violence to get his way, or to get himself and his family out of the way of violence aimed at them because of his actions. A scene from the beginning of III puts it into good perspective: Michael says, "I spent my life protecting my family from the horrors of this world." And Kay replies, "But you became my horror."