Several people have asked me lately about books I would recommend for children who are asking questions about death...so, I thought it may be useful to list my top picks here
When Dinosaurs Die is a good intro to the whole topic--approachable and tailorable as a "read aloud" for discussion of specifics that may apply to a particular family or situation. The illustrator has several other familiar books (he's the author and illustrator of the Arthur series) which makes this book feel familiar and approachable. http://www.amazon.com/When-Dinosaurs-Die-Understanding-Families/dp/0316119555
I have other recommendations for kids who are dealing with losing someone in the immediate family--ones that are less nuts and bolts (altho' both are necessary) and deal more with the abstract "feeling" stuff
Other books I've seen people use include The Next Place (I have an aversion to this one, largely because I think it's not open ended enough for families to apply their own theology or understanding of what may happen after death--and I think it can be a bit scary. That said, the people who love it, LOVE it). I've gifted Tear Soup: A Recipe For Healing After Loss but, I think it works better for grown ups than for kids (pet peeve of mine, "children's books" that are really aimed at grown ups). And...finally, one I've heard of but not read personally, The Invisible String. While I haven't read it, I think the concept as it's described (an invisible string connecting us to all those we love that can NEVER be severed) is a wonderful one.