First of all Let me say sorry for your loss...that is just terrible.
I am really with Wing on this one though. I have never heard of burning sage being bad...or candles for that matter. I also clean with Mr. Clean Lavendar all the time and have never had problems. Granted they are in a huge open room...but still. I mean I would think you would have to be burning a huge bulk of sage in a closed roomto get smoke inhilation. I might tend to think you may have had a spike in your temps for some reason. Maybe an electrical surge...I just have no idea.
Could the child have sprayed something on them??