May isn't in any state to be answering questions right now, but basically, seeing him made her remember that he died, even though she hadn't remembered it before. The same would happen with his parents and anyone else who knew him well; without specifically being reminded of him, they don't give him any real thought and just think "Yeah, he's out on a journey", but if their memories were jolted, they would connect it together. People who didn't know him well just don't make any connection between him and the kid who was killed at all, even if they see him, and need that connection to be evoked specifically, as with the inhabitants of Crater Town. Once that memory-jolt has happened, however, there is nothing left of the memory modification; all it does is file these things away where they aren't looked at.
It's much the same with Alan, though it's not like he actually knows all these details.
Chaletwo: Thing is, there is evidence that somebody was killed. There are records, photos, files. We can't just magically eliminate all that; even if we made everyone forget somebody was killed at all, there would be a great risk of people discovering the evidence, which would immediately bring all those memories back. Worse still, a death is something people remember - a much more extensive memory modification would be needed to completely eliminate that than just to prevent people from recognizing the face of the one who died, and the moment anyone remembered it, it wouldn't just slip away again the way the dead trainers' identities do. There is also evidence that Mark was the one who was killed, of course, but there is less of it and it is more periodical - the only reason those Crater Town people found out at all is that some crazy old woman was reading a two-week-old newspaper at exactly the time Mark came in. Otherwise it would never have happened.