B.O.
Well, I think the teacher could have found a better way to tell you about this. Sounds like she just sent you a note and expected you to "fix" things. If she is educated in Early Childhood, she would know how to work with him in the classroom and how to professionally include you in solving the problem without making you feel horrible.
So let me tell you, you are NOT horrible. It sounds like he has some ideas about things, and is exploring them. If I had been the teacher, I probably would have used the chance to start a conversation with him about what he thinks death means, etc... I really don't think he should be punished for trying to express/understand huge concepts in his world.