First, I am sorry about your loss. I have actually dealt with a similar situation recently. It is a command decision whether to DFR someone. The norm is 30 days, and I obviously can't speculate why they didn't, but I am also not sure what effect that has on anything now. As for "how they can not claim to know his whereabouts" obviously no one can answer why the unit did this. But the bottom line is that until he was "under military control" he was still AWOL. If you can prove that the unit knew his whereabouts and did nothing about it (or evenly actively encouraged him to stay away) you might have an argument to reverse the AWOL notation. But the problem will be one of timing. In other words even if you can prove they told him to lay low, if he died a year or two later, I seriously doubt the Army will do anything. These situations are very fact specific, and you would need to lay out a specific time line of events for anybody to give you an assessment of the likelihood of overturning the AWOL status.
This post is for information purposes only and does not constitute legal advice, nor does it establish an attorney client relationship with Mr. Cassara.
It is possible to file an appeal with one of the various review boards (ABCMR, etc) if you can formulate enough paper (evidence) to provide them a reason to alter his records. this is assuming a lot here, unfortunately.