I'm so sorry to hear about your FFIL. We lost DH's father while we were engaged, so I completely understand where you're coming from right now.
You're not going to have a whole lot of wedding motivation for about a month, but I really recommend that you do not cancel your wedding. The family needs something happy to look forward to. And don't be concerned about it making the wedding a sad event because it won't. DH wrote a poem for his dad and his aunt read it and then gave a toast to his father and my grandmther (who also passed away while we were engaged) which gave us a great way to celebrate their memories. Obviously many of used cried, but within a few minutes, everyone was fine again.
As for your FI, all I can say is just be there for him. There will be lots of hugs. I told DH that I will be there for him to cry on whether it's in 10 minutes or 10 years. The whole thing is awful and sad, but in the end, you will be stronger as a couple and most likely closer with his family.
Please PM me if you need to talk.