He could have rallied other members of the family against Michael: Tom, Connie, the children, other non-kin members of the family like Al Neri (who appeared to have a soft spot for Fredo the way he reacted when Mike gave him the look at the funeral)...Fredo could have also snitched out Mike to the press or the authorities. I don't know any way that Fredo wouldn't have always been a liability to Mike had he spared his life.

Michael may have been able to sequester him from a lot of the family business, but there would always be ways to harm Michael again -- especially if Fredo was still bitter about being cut off from the family business, which you have to believe he always would be, deep down.