Cedar fence posts set in concrete?

Set wood "on" concrete, never "in" concrete...no matter what kind of wood. Setting wood in concrete makes for a continuously moist environment in which not even the best treated wood will survive long.

So, what are your options? Cedar is, indeed, a long lasting wood of good quality for outdoor use. Set your cedar posts in holes that are at least 6" larger than the post diameter, and set them on good bearing. If you can't reach good gravel that can be compacted well, then place a good size flat stone in the bottom of the hole. Set the post on the bottom, or stone, maintain plumb and straight, and backfill the hole with good free draining gravel or crushed stone almost to grade. Backfill in 6-10" lifts, and compact each lift as well as you can before adding more backfill. That will make the backfill quite stable. If you use crushed stone, don't use anything larger than 1/2", and don't use washed crushed stone. The dust and particles from the crushing operation will help "bind" the backfill together. Both the gravel and the crushed stone will be free draining enough to allow water in the soil to drain away from the posts.

Got to agree... even on concrete I seperate with a 1" steel post base.
If you have to set them in concrete be sure to seal the posts first ( twice on the ends ) and if you can bring the concrete up a few inches & slope it away.. you see it's the first 6" of soil that is the real killer more succinctly the bacterial enzyme called cellulase in the first 6" that breaks everything down.

Alter Eagle Construction & Design

Would quarry process be suitable for backfilling because it compacts well? Or should stone be used for better drainage.

If what you're referring to is what I think it is, around here, Massachusetts, it's called crusher-run. And yes, it would be suitable. Although it does compact very well, it still drains. It does not take on the completely solid characteristics of concrete. Water will drain through it, leaving it dry but still tight.