Sorry not RTFT, so this might have been mentioned, but I too was bemused by the mass mourning around her death & funeral. I was a clueless 21 year old at the time, and was quite gobby about 'all the saddo's mourning after someone they'd never met!'.
However, as I reflect now, at the time, I think about the other stuff going on in the country at that time and can see how people were rocked by it. There was great political change going on in the country. We had a Labour government for the first time in my (conscious) life, I remember feeling quite scared when the conservatives lost as I hadn't known anything else. ( I was from a tory family, and 'we'd' never lost before). But it also wasn't the Labour that the seventies had known and loved, so it really was different for everyone.
Then there were lots of things (good and bad) that shocked and divided the nation such as the Jamie Bulger trial, Brit pop and music mixing with politics, not just with songs as it always had been but actually attending party conferences etc.,New Age travellers & illegal raves and the public order act that stopped them.
Although I'm sure I didn't realise it at the time, I think it felt very different and was probably unsettling for many people.
Then one of the most famous people in the world died under horrendous circumstances, possibly proving for many that bad things can happen to anyone. I can't believe that all those people mourning thought she was the angel that the press made her out to be but by uniting in some way (grief for example) it provided stability and unity which was may have been very comforting for the turbulent times we were facing/had just faced.