I won't try to stop anyone from picketing his funeral—free country and all—but I think that's exactly the kind of response his family is probably hoping for. That church (insomuch that it can be called a "church") thrives on anger, its lifeblood is controversy and offense and publicity. I think the best response to Phelps' passing is to imagine what he would do in a similar situation, then do the opposite.
Phelps was an extremely unpleasant human being who brought a lot of pain and sadness into this world, and he directed no small portion of that pain and sadness toward the angry brainwashed saps in his family who strut around with those horrible picket signs. He died a man who was almost universally reviled, apparently even within his own clan.
Don't celebrate Phelps' death. Mourn his life.