I think it does depend on what children may ask as to how much information is given at any one time.
For example if the child looked you in the eye and said - but the doctors will make him all better won't they? Well that starts the conversation into a deeper area. You may not say, no it will kill him, but I would think being honest is best and at least say, no he wont' get better. The child may not leap from that to terminal, but would at least know that this is serious.
I know that my daughter told her then 5 year old daughter that Chris was going to die from the MND. Now my granddaughter was very young, but she is actually very 'intellectual' like both her parents and quite possibly asked a lot of pointed questions. When they next came to visit, we were sitting at dinner on the first night, and Sophie innocently says something about he is going to die. I immediately took the conversation up with the topic of well yes, and in fact, we are all going to die someday, we don't know when, but death is part of life. I felt it went quite well with her at such a young age.
Chris however was furious. He said nothing (his speech was quite bad) in response to this and after the meal became very withdrawn and pretty much remained that way for the rest of their visit (a whole week). He told me that it had been totally inappropriate for them to tell her he was going to die and they had no right to do that. He refused to speak to them about it however, so I was left piggy-in-the-middle. My daughter had come a long distance specifically to give a week of her time to spending it with Chris.
So it's a very touchy thing. It was hard, Chris had FTD, and he was always in denial - he was 'fighting it'. He knew he couldn't beat it, but he felt that if he refused to admit that out loud somehow ... who knows what. I think it was very confronting for him to have it come out of the mouth of a babe, and we all know that children will just say out whatever is on their mind!
Because he was so sullen and withdrawn, Sophie became unwilling to interact much with him, of course his speech was bad and his mobility was poor. This only became more and more uncomfortable for everyone.
The next visit, last xmas, I encouraged games with her to guess what he was saying (his speech was far worse, but it was always simple one word responses). She became thrilled that she could catch some words (lol they were dependable answers, oh the joy of youth). I also encouraged her to help do the peg feeds and she was fascinated by this. She enjoyed fetching things I 'forgot' to bring with me into a room to do a task with Chris, and to help clear up afterwards.
I thought of this after what Mike said about how he involved his children. I think that some actual physical contact and feeling they are involved and helping is really important for young children. It's harder for it to be so scary if you are actually helping out.