My Band is toying with the idea of covering a song that their former bands founder wrote. My gut tells me that if we do cover the song we should keep it to the original, no more, no less. Therefore re-writing for two guitars, slight modifications to a few phrases is out of the question from the grounds of respect. Anyone have an opinion?

Your bandmates that were bandmates with the deceased guy in question should reflect on their experiences with him to judge whether or not he would be ok with you guys modifying the song. Another possibility is to ask the close friends and family of that fallen former member their opinion on what he would want / be ok with.

Really none of us here can tell you what to do in this situation. Your band members would know far better what he would've wanted than anyone on MA.