I'm choosing to believe that there's a very far spirit-world in which the afterlives happen and that people can make their way to the closer spirit world for dealings with their loved ones.

In that thinking, Iroh would have died, but still made his way back, because Zuko still needs looking after... and I just gave myself a lump in the throat thinking of that.

Future scene, Zuko's lived his long life and passed on, he eventually meets up with his uncle and can sit at tea as a young child, and even later on introduce Iroh to his wife.