When Kay tells Michael that Anothony knows he killed Fredo, this is many years after it happened. Tom had to know about Fredo's fate ahead of time. In II at the meeting where Michael insults Tom about his mistress, etc., Michael poijtedly asks him whether he is going to go along with "these things I have to do." Tom, being Tom, rhetorically asks Michael whether he has to rub [/i]everybody[i] out, and Michael says "only my enemies." This means more than Roth is going to be killed. In fact Tom is sent to convince Frankie to commit suicide. This leaves Fredo as Michael's last enemy, so it is reasonable to assume that Tom, Rocco, Neri and Michael all knew that Feedo was a dead man when they left the meeting.
Looking at the entirety of the situation, it was well known among the family members that Michael killed the heads of all five families in New York, as well as Carlo. Connie, in fact was more than a little miffed about this.
It took Connie a long time to "forgive" Michael for his transgressions, and during all that time, and we can assume even after, she and Kay had back-channel communications.
Certainly it made the news that Hyman Roth and Frankie Pentangeli both died within a reasonable time of one another, and it would also have been known that Fredo also died in that same time frame. Add to that the fact that it was Connie who was sent to make sure Anthony didn't go fishing the very day Fredo had his "accident (kinda like that bullet ridden car Tom told Kay had been in an accident in I)." Further, Connie said that Anthony could not go fishing because Michael had to take him to Reno. In fact Michael didn't take Anthony anyplace, because he was there to hear the gunshot that killed Fredo. Michael probably never even thought that Anthony would not remember the fact that he was supposed to go fishing with his uncle, who happened to drown on the same day he ended up not going to Reno.
Once Anthony and Mary were sent back east to live with their mother, both of them realized what a monster Michael really was. Anthony was bitter about it, and evem Mary asked Vincent about Fredo's murder.
The circumstantial evidence was overwhelming, and it was no large leap for everyone to conclude what the truth really was.
As for Connie's comment about Fredo drowning, it is important to note that she made it after Michael told her he had confessed his sins to a priest. Of all the things Michael did for which he had to make a confession, the one thing COnnie mentions is Fredo's "drowning." that was a signal to Michael that she knew what really happened but that she would keep silent.