Bec has pretty much said everything I would say! My mum died when my DDs were 10 and 2, we let them come in and out of the room when she was near the end and they knew that she was going to die (not the 2yr old obviously) They both saw her after she died but I let them choose whether or not to see her and how long they wanted to be in the room.
As a teacher and a mum i find honesty and facts the best things with kids, as Bec said none of this "just fell asleep" stuff as it will scare the cr@p out of them. I find with the kids at school they can be surprisingly matter of fact about death even of close family members.
One thing i found really helpful when mum died and when grandma died 2 years ago was to have a support person there for the kids who wasn't directly involved- my MIL was brilliant with the girls after mum died and DH was after grandma's death so I could grieve without stressing about the girls and knowing they could grieve too. Unfortunately DH's grandfather died exactly a week before my grandma so that week and the funeral week ( their funerals were a week apart too) was a really tough time on us all)
One thing my kids have found comforting is that we told them that their grandma etc are in heaven looking out for them and that they are a star now. DD2 likes to point out grandma when the stars first come out at night- not for everyone but my kids like it.