I think Sabo is still alive.
I have full confidence that he is part of Dragon's Crew.
Think about it:
! Dragon saves Sabo and they have a deep conversation, in which they make a 'spiritual' bond.
! Then, Dragon saves all those in the fire and tells them that they should jump aboard ship if they're willing to fight 'for freedom'.
! Later, in the same episode, Sabo has an epiphony against his parents in which he asks the rhetorical question 'what is freedom?'
Sabo and Dragon are evidently working together. In a little google search I did, I found this website, which argues the same point, albeit with different reasoning.
http://www.mangashare.com/forums/threads/24811-Sabo-is-alive!
A penny for your thoughts (just tell me your paypal account and password =D),
keb