Big Bird was handing his friends pictures he drew of them(Susan, Gordon, Luis, Maria, David, Olivia, Bob). He also did one of Mr. Hooper. Big Bird asked where he was. The grown-ups looked a little uncomfortable and reminded Big Bird they told him Mr Hooper died. Big Bird said he would give it to him when he came back. They told him when people don't come back when they die. Big Bird still didn't understand, but eventually he did. They ended with Big Bird saying "I'm going to miss you Mr. Looper" to which Maria replied "That's Hooper, Big Bird, Hooper" They all hugged Big Bird as the scene ended. Very touching and emotional scene. I'm getting a little choked up just typing this.
There was a bit more to the scene, but that was the basic jist of it. I'm not sure how Will Lee died. I'm guessing it was natural causes, but I might be wrong.