I'm not sure Fredo ever got over watching Vito gunned down in New York. It doesn't excuse what he did to Michael, whether he knew it was an actual hit rather than a simple monetary coup, but I think he was even more addled in the head after that.

I'm not fond of Kay in the second movie myself, but I can see how she'd gotten to the point where enough was enough for her. Even had she not left when she did, she knew enough of Michael to be able to justify leaving him after Fredo's murder. The changes in Michael were necessary for the position he was placed in, but those changes slowly made him more and more unrecognizable to Kay. She might not have had the right to try to take his kids away from him or have that abortion (in Michael's mind), but she had every right to leave him.

What really amused me was that everything taking place during the "present" was all because of that weasel Moe Greene.