BUT! Before you go to the cut I really must warn you.
If you are a sensitive soul and want Totoro to remain a charming, innocent wonderful tale of the two sweetest sisters and their wonderful adventures with the mystical creatures living in a giant camphor tree, then please don't read on. You may find the following a little creepy! Ghibli have denied it completely and it is quite possibly completely untrue.
This blog explains it well,
and another blog here
and a denial here
Before I wrote this post I decided to watch the movie again, it's the first time that I've watched it after reading this and despite spending the entire movie looking for horrific hidden meanings it was still as sweet and as charming as ever! So I really don't think it has ruined anything for me.
I find the idea however very facinating, though much of it seems to be a little vague or rather you just have to assume it to be true. The calender of the hospital wall I thought was very interesting, can any Japanese speakers confirm the date? There is a 3rd calender page too between the September and August when Satsuki writes to her mother - perhaps it is too small to see which month it is...
Another thing I thought was interesting but has not been picked up on is the first blog is the shrine the children shelter under during the rain storm. On www.nausicaa.net/miyazaki/totoro/faq.htm
As I mentioned before Ghibli have apparently denied that Toroto is death, but I don't think it's the kind of thing they'd be likely to admit - not going to do much for the sales of Toroto toys now is it?
I'm not sure about the film being based on the Sayama incident, I think any connections are rather loose, but I do think there is a theme of death running along side this story. Their mother is clearly very ill, the house is described as haunted, the totoro first appear ghostly transparent, the cat bus and it's destination of "grave road" and the apparent lyric "those guests who ride are cheerful ghosts" as the children ride in it. I think that the children are closer to the spirit world because of their ill mum, the old house and because they are kids. Totoro may well be a spirit of both life and death, he's not the first in Ghibli and this doesn't make him scary. The cat bus may be a ferry to the other side. Perhaps if they stayed with the spirits they would be dead. But I'd like to think that they were just in between. Their mother will return home happy and well (as she does in the credits) and the children will not see Totoro again perhaps even forgetting him completely.