It's interesting reading the objections to the 'gay Fredo' subplot - one side seems offended that a Corleone would be homosexual at all (i.e. offended about homosexuality itself), the other side objects to the predictable gay = weak connotation. Then, of course, most here hate the Winegardner books anyway.

Personally, I thought it was dealt with quite well, and worked somewhat - Fredo truly hates this part of himself, as anyone with his background would. It's not a politically correct approach, it's a realistic one given the context. He's a bit of a trainwreck as a Corleone in the films, you could argue that his weakness stems not from being gay, but from self-loathing and fear (resulting from being a gay man in this particular environment). Take a look at what happened to Vito in the Sopranos - can you imagine how a fanook would have been treated fifty years earlier?

That said, the subplot did seem somewhat gratuitous, an attempt to place something of a modern spin on the story which wasn't necessary at all, and wasn't ever really suggested by anything in either the book or films. Deanna Dunn accusing Fredo of 'not being a real man' is about all there was, and I don't think that was ever really the intention of the line anyway (although it fits). Crap in bed or impotent, maybe - gay, probably not.
(Make what you will of his particular choice of alcoholic beverage. A banana daiquiri just sounds disgusting more than anything else)

There was enough drama in the character of Fredo as it was - we knew he was doomed, he was a complete fuckup, no need to screw him up even more. The vague implication of his having been molested by a priest was more of a red herring than anything else, and not one that was exactly credible. However twisted and perverted some of these nonce priests are, can you imagine one daring to put the moves on the teenage son of a mob boss?