Personally, I think that the reason Michael ultimately decided to have Fredo killed wasn't just because he "took sides against the Family" but because he lied about it, willingly, and then went on his "I was passed over" rant. That rant is what sealed his fate because it showed Michael that Fredo would never be happy just being "the Don's brother"; he would always resent the fact that he wasn't made the Don, whether or not that was "how Pop wanted it". That, IMO, is the real reason Michael had him killed: he could never trust that Fredo wouldn't seize any opportunity or sign of weakness on his part to take another stab at control in the future.
I agree with this.
Michael killed Fredo because, as he tells Cardinal Lamberto, "he injured me." Banishment would have had the same practical effect of guaranteeeing Michael's safety.
If the rant - and Michael's fear of future treachery - was really what sealed Fredo's doom, Michael would not have continued to allow Fredo to access the compound, nor would he have allowed him to live as long as Mama was alive.
Michael was so stunned and bewildered in Cuba that his "You're still my brother" plea may have been sincere. But I think once Michael calmed down Fredo's die was cast.
There's no way that Michael, at that stage of his life, would have given Fredo a pass. It was just a question of when.
