It never exactly makes me happy when a character I like dies (though Neji wasn't really one of my favorites), but this is what the story needs. Killing Shikaku and Inoichi is powerful, and now to finally have one of the K11 die is a smart choice. Up until now we've had a couple of really affecting deaths (i.e Hiruzen, Asuma, Jiraiya) but between Neji and Choji being miraculously brought back from the brink of death in the Sasuke Retrieval Arc and Nagato bringing literally everyone killed during the invasion of Pain back to life, it's hard to feel like there's ever any real danger in this series.
I think the next step, much as I like her, is to have Tsunade stay dead. It would be a fat load of bullshit if she somehow survived being cut in half.