I don't think Sotha is really dead. He's tied in with his city to such an obscene degree. He's like the internet. Destroying one server doesn't crash the entire thing. Almalexia destroyed his original body, which in all likelihood no longer represented the whole of his being. DF said in a letter that we only saw a small portion of the city and that it had many inhabitants.
As further evidence of my theory, when you remove the sigil or master of a pocket universe that universe typically comes crashing down. Look at Akhulakhan when Red Stone was removed... in the game Oblivion there are multiple examples. Each and every Oblivion gate, not to mention Paradise, and Tamriel itself began to dissolve a bit when Uriel was killed, if only briefly.
There appears to have been no collapse of Sotha's realm, either massively or subtly. There was no damage at all. Nothing came crashing down. The machinery still functioned. I personally believe his city was his own personal pocket realm similar to Mankar Camoran's Paradise, and that the fact it didn't dissolve with his "death" is evidence he lives still.
But maybe I've read too much into it.
Interesting thought, even if someone from BEThesda (I can't remember who) has confirmed him dead. After all, who else would've known him better than his sister-god and therefore would've known how to kill him? Or if you prefer why isn't the city crashing down, perhaps Sil wasn't the sigil.
RE the decay: I attributed that to Fabricants acting under Almalexia's command tearing it apart.