You said it yourself: she buried the dead ones, which is why there have been more villagers born than her max population. If you play long enough, you could have hundreds of villagers born and still not increase your max population - the babies take the place of the older villagers who die.
The ability to bury villagers is one of the puzzles and depends upon discovering the right place after you purchase a certain Village Technology. In general, the best way to discover things in the game is to drag one of your adult villagers around the island after every tech purchase and look for new things that they can work on.