how do you tell a child his or her daddy died?

"Sweetie, you know that Daddy has been sick in the hospital. We hoped that he was going to get better, and the doctors and nurses were all trying their hardest for him to get better so that he could come home. But his body was too broken, and they couldn't fix it, and he died. That means his life is not in his body any more and we are all very sad because it means that he will never get better and come home, even though he really wanted to, and we all really wanted him to. Daddy did not want to die, he wanted to come home and be with you. After he died, his life was not in his body any more, but his life is in our thoughts and we still love him and he still loves you."

Also... my 2 1/2 year old daughter amazingly somehow found a way to blame herself that her daddy got pneumonia. She remembered stepping on his foot and hurting his toe...

"Julia, Daddy's toe did not make him sick with pneumonia. You did not make him sick. It is not your fault that his lungs got broken. Daddy loves you so much and he wanted to come home to live here with us again, that was what he wanted more than anything because he loves you so much. He is so sad that he can't come home to be here with us anymore."