(((((((((Lucy)))))))))) how upsetting for you and your son
I suspect that the children overheard a conversation, might have been something as simple as 'so and so wont be in tomorrow to do reading class because she....' - you need to talk to the parents of these children.
We once had a similar situation where my daughter laughed about a classmates Grandad who had a facial disfigurement. My husband and I were horrified as you can imagine, but we talked to our girl, explained and answered lots of questions and talked about the feelings in our hearts and how much love there is between this girl and her Grandad, how much they enjoy walking their dog and that people with an illness or disability are most definitely not second class citizens and worth and normal as much as anyone else.
Our girl went and made up a 'sorry box' = she took a shoe box, decorated it and put one of her soft toy rabbits, pretty hairclips and some other little items in there and gave it to the other girl next day. We were really pleased because this was her idea alone.
My daughter is 9 years old now, still friends with the other girl and often plays at her house, where the grandfather lives as well.
Your son is clever, I bet he knows quite a bit about diabetes and I bet my rock bottom dollar that he would never laugh about anyone else because they are diabetic, praise your little boy, he is one of the best.