I'm sure space funerals will become a thing, but then be banned later because the caskets are moving to slow and they may become primary space corridors. That said cremation is an option that is gaining ground, along with multilevel funeral caskets, where they are stacked and buried with the deepest one then less deep above etc, atm I don't see a significant problem with it as long as the main plot land above can still be utilized.
The main issue would be in high density or really poor places where it doesn't make sense, having them in the countryside and making people drive seems like an ideal use for otherwise low utility space.
I think just having the caskets out in space is dangerous. I mean, even now our satellites have problems with the risk of being hit by space debris from our other activities out there. Imagine have your small satellite up there getting hit by a casket showing out of nowhere.
As for multilevel niches, that's exactly what's in the picture. Cremation is still best when it comes to saving space. You can have the urns in a columbarium or even better, release the ashes back to nature. The main hindrance to adopting this is obviously religious. Anyone would agree it is practical.