He wondered about it in something like panic, staring at it in puzzled consternation.

There was the choice thing and he couldn't eat it.

Then he became aware that his eyes were hot, the lids burning; and there came a choking, even though he no longer had any cake in his mouth.

Suddenly he knew that he couldn't eat the cake because he had lost his brother--his brother who had passed on.
He gulped alarmingly as the full knowledge overwhelmed him.

He was wishing that Merle had kept the knife, even if it wasn't such a good knife, so he would have something to remember him by.