It would have been good to explain to the child that non-Catholics cannot enter into Heaven, however we do not know the state of someone's soul when he dies. Therefore, if perchance there was a conversion to the True Faith right before the moment of death, then certainly prayers could be offered for the soul.
"Mass cannot be said publicly for a pagan who has died without having given any positive sign of conversion or contrition ; if some such sign was given, it could be said privately, and conditionally on the pagan having died in
the state of grace.
If a heretic or schismatic died after having given signs ofrepentance, Mass may be offered publicly for him ; if he gave no sign of repentance, Mass may be offeredprivately, if no scandal be given. Consequently, a priest may accept stipends and say Masses for a non-Catholic who died firmly adhering to his or her sect, provided there is no scandal and the Mass is said privately. Scandal could be precluded by explaining the true doctrine on the matter. In cases of heretics, schismatics or pagans, who have died without any sign of repentance or conversion, Mass cannot be announced for them on the ground of scandal and indifferentism. But a private Requiem Mass with proper prayers may probably be said, though the proper prayer is usually not added." - H. Davis, SJ, Moral and Pastoral Theology Vol III.
As for the Dimond's assertion of the bishop being censured by the pope, as always, the Dimond's bend and twist reality to support their own twisted theology. The bishop was censured for mentioning the name of a non-Catholic in the Memento of the Canon.. that is PUBLIC prayer as the Mass is an official liturgy of the Church.
If the bishop simply said, "Please pray for the soul of the deceased monarch... may God have mercy on his soul", this would be no problem because this is a PRIVATE admonition to others to pray.