In a similar situation, I think that Vito's thinking would have gone:

1. I am the head of the family (not "The Family," just the family);
2. Fredo is my responsibility;
3. Fredo's betrayal is due to my carelessness.

Had Vito still been around, and Fredo done something so stupid, I think that he would have been confined to the compound or sent to a sanitorium or something. He would not have been killed.

The tragedy to Michael is not so much that he killed his own brother, as that he killed his father's son.