Keep in mind that in the novel Tom tells Kay that treachery can't be forgiven. Although he was talking about Carlo and Tessio, the same could be applied by Michael to his own brother.
Yes, that's it exactly. Fredo would have been a threat to the family for as long as he lived. As Puzo also pointed out (vis a vis Bonasera being called upon to bury Carlo), gratitude is very short-lived and breeds resentment. The depth of resentment Fredo showed Michael in the boathouse also showed that he'd never get over his being passed over. Another enemy of Michael's would have seen Fredo as a possible ally.
