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If he is expressing desire, it is appropriate for him to go to the funeral in order to have closure. You would want to prepare him ahead of time in regard to what he's to expect from the funeral home, to the cemetery and afterwords. If he wants to write a letter and read it at the eulogy or placed it in his grandmother's coffin, that is something he can do to express saying good bye. Alert him that there may be sad people who're distraught and that their grief may affect his own grief.
He may have questions for you about what happens when someone dies, and based on your own spiritual view, you can help him grasp the idea. You could mention to him about the fact that everything in life is impermanent and that no matter how much he loves someone, at some point, they cross over.
A wonderful book to read or give to him is The Fall of Freddie the Leaf: A Story of Life for All Ages by Leo F. Buscaglia.
And you can remind him that it is not the image of his grandmother now that he had crossed over that would stay with him but all of the times they've shared together while she was alive and well, and that a part of him would always remain within his mind and heart. Bereavement is a process and you may reassure him that the feelings he feels now with time will change.