Let's go straight to it - clues in Sgt. Pepper that paul is dead.
1. The doll with the cracked head far left.
2. The man above Paul.
This man is holding his hand above paul like a preacher would at a funeral before the body was buried.
3. The doll holding the car far right.
There are a few things with this. The doll itself is being held by some demonic creature with a bloody, skeletal hand ( look by her waist on the right side ). In her hand is a white beetle (also seen on abbey road) representing the car Paul was in when he crashed.
4. The people.
Every person seen here (except the beatles themselves and the beatles copy), has either had a NDE (near death experience) or is dead. This is an obvious clue towards Paul's death.
This cover is obviously picturing a funeral for Paul, the drum being the gravestone. Some more proof on this is the freshly dug soil, and all the people represent who Paul would have wanted at his funeral (had it not been secret).
6. Here lies Paul.
Look at the "hear" in hearts on the drum. Now look at "les" in the Beatles. In between the "l" and "e" is a small toy the would represent the "i". So far we have "hear lies", but where is Paul? Look at the instrument below the "lies". If you look closely it spells out "Paul". Hear lies Paul.
(Hear is misspelled to be less obvious.)
Look again at the instrument. Not only does it say Paul, but there seems to be a question mark as well. This represents the general public's confusion.