Personally, although I can understand this way of looking at things, I find it rather cruel to name a child after a deceased sibling, since the second child is likely to grow up seeing himself/herself as a mere replacement, whose basic raison d'être stems from the death of the sibling, and consists of assuming the role of a substitute for the other. It's not a particularly enviable situation for a child whose natural desire is to affirm his/her unique personality and individuality. The worst situation of all is when a baby boy replaces his deceased sister, and is looked upon by his mother as an ersatz female.
I discovered recently, at the level of my paternal great-great-grandparents, the case of two male offspring whose given names were Robert. The first Robert died at the age of two, and a second child, born two years later, was given the same name. The second Robert, born on 1 February 1860, received a weird second name: Tillage.