DC, the apparently contradictory terms of the passage you quoted could be explained in one of two ways:
1) Michael remembered Fredo as being the "toughest" of his two brothers--because Fredo was tougher on him than Sonny was. If I recall correctly: After Michael proposes to kill Sollozzo and McCluskey, Sonny talks about how strong-willed Michael was. He says something like, "And Freddy had to beat the s*** out of you every day." So, perhaps in the family hierarchy, Sonny was too old to directly discipline or contend with Michael. But Fredo, who was closer in age to Michael, did.
2) It's another example of Puzo's sloppy writing. "Tough" Fredo is not sustained anywhere in the novel. But "not ruthless enough" Fredo is consistent. We see that side when we see him have a nervous breakdown after Vito is shot; when we learn that Moe Green slapped him around, and when he takes sides with Moe against Michael.