Learning how to make dead characters a continuing part of the story is one of the interesting challenges in Fiasco. It creates one of those situations where you have to focus on how other people are thinking about them, or use them in a Rosencrantz and Guildenstern kind of way, or be willing and able to construct flashbacks which comment on events that have just happened.

For instance, in your situation as described with the sheriff who died during the shoot out, I wouldn't have commented on the events of the death or the methods – but on a flashback to sometime before he caught Eugene in the first place, mounting up and telling his deputy, "I know exactly where I'm going," and riding off to somewhere else. With a slow fade as he rides away to his grave (as a sort of narrative meta-commentary on everyone else getting lost along the way and ending up alive).

That sort of thing takes time to learn how to push the images that you've played with around.

Once people get comfortable with the sheer amount of power that they have when it comes to framing scenes, you'll see people starting to play with that a lot more. First they need to know that they can do things and that those things will matter in the long run to the game, and then they will play with the toys you have in front of them.

Great to see that your GM-less gaming has gotten off to an excellent start. Sometimes beginnings can be a little rocky.