He totally understands that Daddy is not coming back. There have been several little confirmations of this, but one in particular was pretty painful... We were in AZ at my IL's house, and Ginny had said something to her other grandson, Jeffrey, about when his dad gets home. Jacob thought she was talking to him and he said to her, "But Gramma, Daddy's dead!" All I could do was correct him that Gramma was talking to Jeffrey about Uncle Jeff.
Another time, Jacob said, "It's gonna be Mommy and Jacob riding bikes in town now."
"Yes, it is, my Little Love" I told him. I've got some big shoes to fill.