Vince I think you should talk about your nephew to them..when you are comfterbale about with it.
They will probably ask questions about him when they are older and see pictures. I think it is important to talk about passed family members..I know I am grateful to my parents for talking about their fathers to me..I don't have many memories of them but thanks to my parents I know they where around and involved in my life and loved me very much. And I always tell stories about my greatgrandmother and grandmother to my little sister.

As for religion..that is a complicated thing..it really just depends on how important the religion is to you...but it is always important to let people make their own choices when they come to a certain age.