I agree that the burial of villagers seems a little perfunctory. However, I don't think every villager should down tools and go to the funeral as in VV1. I think that, because of the very important child-friendly aspects of the game it is important to LDW that they downplay to a degree deaths in the village.

At the moment a villager will occasionally wander off to pay respects and leave flowers on the graves; you can make them do it my dropping a villager onto the burial ground. In addition, there's an island event when the villagers hold "Ancestor Day" (or similar) when they all visit the graveyard together.

Villagers can and do die of untreated illness and there are a couple of events that can cause a villager to die, such as being bitten by rats or fire ants found in a sack.

When someone sneezes that is usually a signal that a doctor has found and cured a sick villager. They will also sneeze if they are sick and picked up.

I agree, It would be a good idea to have a range of illnesses that the stews could cure, but I don't think people should be made any more sick than they are already.