Hello Chaos, and welcome back.
1) I was testing on a flat surface. Using the ECP debugger I also tried setPosing a man half below ground. Dead or alive it did not work for me, he pops back up to ground level. I have OFP/R 1.96. It would help if someone else would test to verify this.
2) The problem is this. Player A is close to the body but player B is not. The script with continue on for Player B, but for Player A the script still loop because the body is too close. Player A will see everything happen. The body sinking and being deleted. The camCreate command will only run on player B's machine so only B will see the bodybag and then the grave.
3) A third problem might be lag if this script is run on too many enemy units at once. For each enemy unit there is a @!alive _t. If run for 50-100 enemy this is the same as adding 50-100 triggers to a map.
Your script will work in MP, but it will not work as you want it to. The only fix is to place all players in an array and then check that the distance is great enough for all players. This is still not 100% but it is better.
In the init.sqs
playerArray = [p1,p2,p3,p4...]
Then in your script something like this for all distance checks:
? _deR == 1 && ({(_t distance _x) < _e} count playerArray) == 0) : goTo "deleting"
Will make sure no players are near the body. Then your script should work properly.
The best way to do this for MP without lag is as follows. Remove the first part of your script that loops through all units in an enemy group and put it in another script. Make it so the new script adds a killed eventhandler to each unit of an enemy group. Have the eventhandler call your body removal script for that unit. Eventhandlers do not take as much cpu as triggers and the @ command. When the enemy unit is killed, the eventhandler will fire on the server only, and your body removal script will execute on the server only. In your body removal script check distance to all players as I show above and replace the camCreate command with the createVehicle command. createVehicle will make all players see the graves.
Doing it this way will make it 100% MP compatible. If you do not want to do all this then say in your readme that it is for SP only.