Originally Posted by rex
Yes, she is dead. Either killed by the original assailant(s), or more likely, she survived the assault, and was later killed (as Teddy states) by Leonard himself, in an insulin overdose. Either way she is definitely dead.
Since Leonard has no way to remember whether or not she survived the assault, it is more plausible to believe Teddy that, in fact, she did survive. This is also consistent with many other clues thoughout the film. Leonard can only know what happened based on reading the police file, which is missing pages, undoubtedly removed by the corrupt cop, Teddy, in order to manipulate Leonard for his own ends.
One interesting question: How does Leonard remember that he can't remember? IOW, how does he remember that he has a mental condition? Possible answers:
1. This is a work of fiction. Everything doesn't have to make sense.
2. Leonard's memory trouble is the result of psychological trauma, not organic causes, (just like Leonard's imaginary or composite alter ego, Sammy.)