Many people, especially poor folks, don't do obituaries, because they can be expensive. Original death certificates are always in high demand, and people tend to not realize that they need dozens of them -- proving to a teacher that grandma died is low priority. There are other cultural factors as well. Some religions call for immediate burial, so publication of the obituary will likely lag the student's absence.
Another factor to consider is that fall exam times line up with the holiday season, which also happens to be a time of the year when death rates spike.
Given all of the other accommodations that colleges give students, I don't see the big deal here. When I was in school, I was able to get incompletes to finish coursework or take exams late for various reasons. I had friends who got ADD diagnoses from doc-in-the-box places because they found taking exams in lecture centers with tiny desks impossible to deal with. If a C student gets an extra 3 days to study, the outcome is likely the same as it would have been.
I'm a professor in a university. For us a photocopy of the obituary, death certificate or an equivalent document is enough to allow the students to take the test ~1 week later. But the exact documentation needed probably depends on the university.
No, generally not in the timeframe between being notified and the funeral. There may be an announcement in a local newspaper -- local to your deceased relative -- but this is as likely to be after the funeral as before.
I don't think there's an issue with saying "you're getting a 0 on the exam until you furnish proof of death and proof of relation, at which point you can (re)take the exam." Surely even the most bureaucratic university would have some mechanism in place to allow a student to take an exam, even a final, later than planned (or even the next semester?)
