DD3 is also very interested. She makes up stories, and often people or animals die in them (and then, sometimes, they come back to life). DD discovered death, unfortunately, when I had a miscarriage last fall. We just talk with her honestly and openly about what it is and what it means. We are not religious, but we have also explained that other people have a different view of what death means.
I will admit that a few times I've said something like, "Please stop saying that you are dead. It makes me feel very sad." I'm don't think that's the best approach, because I don't want her to be afraid of death and I don't want her to feel she cannot do the work she needs to do to understand it. But the simple fact is that it is creepy when my beloved little child is being morbid and there is only so much of it I can take before it starts wearing on my sanity.
