The only people who died on my first playthrough was the Normandy crew since I didn't go immediately after them after they were taken by the collectors. Other than that, all the important people were alive.
I loved Silent Hill 4, issues and all. But, I can see why it wasn't part of the collection. Silent Hill 2 and 3 were the best in the series and Konami obviously wanted to showcase the best in order to try and drum up some potential sales for Downpour.
Man, I remember playing this with my cousin an it being extremely fun and chaotic. When I bought my first house, we played it on a small 13" T.V. on top of a couple of moving boxes with some beers. Great game.