I think he loved all his sons equally. vito never actually said "michael you are my favorite." michael was the youngest of the sons, the purest. a big theme of GFI and what partially shadows GFII is the high hopes that vito had for michael and his future. the hopes of michael becoming a more "respected" corleone. the last conversation between michael and vito in GFI, i think, can help us out on why vito was somewhat holding michael on a pedestal.
from www.thegodfathertrilogy.com
MICHAEL (reaching over, touching his father)

What's the matter? What's bothering you?

(then, after the Don doesn't answer)

I'll handle it. I told you I can handle it, I'll handle it.


VITO CORLEONE (as he stands)

I knew that Santino was going to have to go through all this. And Fredo -- well --

(then, after he sits besides Michael)

-- Fredo was -- well -- But I never -- I never wanted this for you. I work my whole life, I

don't apologize, to take care of my family. And I refused -- to be a fool -- dancing on the

string, held by all those -- bigshots. I don't apologize -- that's my life -- but I thought that --

that when it was your time -- that -- that you would be the one to hold the strings. Senator -

Corleone. Governor - Corleone, or something...


MICHAEL

Another pezzonovante...


VITO CORLEONE

Well -- this wasn't enough time, Michael. Wasn't enough time...


MICHAEL

We'll get there, Pop -- we'll get there...