I took my kids to my ex-brother-in-laws wake when they were 5 and 8. they had met him a few times, and he was the father of their favorite cousins. I knew it would be a decent learning experience since they didn't have a close attachment. They were able to experience the atmostphere and the people, even to see my BIL's body in the casket, etc. I prepared them for it as we drove the 20 minutes to get there. I told them what to expect of the room, the casket, the people. I told them how to behave, what to say, what not to say and I made sure they knew I expected appropriate behavior, and that they were not required to stay in the room, or even get close to the casket if they didn't want to. I also brought their handheld video games so they could sit in the lobby if needed.
It was a "good" experience for them and they were able to learn in a situation where the person wasn't that close to them so they didn't feel a personal loss. We are also active in our Christian faith so I was able to explain and answer questions about what happens after we die. That's a tough concept for a 5 yr old.
My then 5 yr old son was normally very hyper - but he behaved wonderfully. He could perceive that my expectations for him were appropriate and he acted accordingly. I told him I was very proud of him.
Both kids wanted to go up to the casket, they looked at my BIL's body, they asked soem questions, they told their cousins that they were sad for them and wished they could help them not feel sad. It was very sweet.
The reason I used this as a teachable moment is because they were both very close to their two grandmothers and one living grandfather - but none of them were healthy and I expected the kids would have to attend wakes & funerals of people they loved dearly - and a few years later they did. My FIL passed away about 5 yrs later when my kids were in 5th & 8th grades and they knew just what to expect and how to behave. They had greater confidence in themselves.
My suggestion would be to bring them along. Most of your old friends and relatives will be there and kids bring a fresh breath of air into a sad situation and help people to realize that life goes on, even in loss. That generations come after us, that there's continuity. Keep in mind most funeral homes have rooms for kids that include tables and toys, a TV and DVD player, etc. Call ahead & ask. If not bring a portable DVD player along and coloring books or other "contained" activities they can stay busy with. Bring your kids at least to the wakes - but depending on how long & solemn the funeral will be - maybe get a baby sitter.
I'm so sorry for your loss - I can't imagine losing one of my sisters at this time in my life. My 82 yr old aunt just lost her older sister and is mourning that loss even at her advanced age. No matter what your beliefs, even if you know you'll see her again some day, it's still a loss in this life.