There are a lot of mixed signals and interpretations. I tend to lean toward Michael keeping Fredo alive as a brother. But as plaw observes "the Kiss" seals Fredo's fate. Was Michael thinking clearly in Havanna? In a film context we are riding the emotions and doubts of who was the traitor and to what extent. We are pulled back and forth.

I would tend to think that as time went on and Michael put more pieces of the puzzle together that he learned Fredo was more deeply involved and knew more than he original thought. The boat house scene sealed Fredo's fate as SB indicated. Fredo knew about Questadt and he expressed anger at being stepped over. Fredo, athough stupid and weak was dangerous and unpredictable.