To which nodes notification will be sent is not up to Zookeeper. It is based on a node registering to the zookeeper to watch a Znode. Only those nodes that are registered will be notified.

In this case, the nodes(obviously the lives ones) are watching for a change in /all_nodes. Any nodes that are watching /all_nodes, will be notified. Which in this case, is obvious that live nodes will get the notification.
Dead nodes have no session with zookeepers, So, zookeepers can’t notify them anyway.