It's over.
Quixote dies because Cervantes doesn't want more pirated fan-fiction being written about his hero. Earlier in the novel, there have been various issues about the unauthorized sequel by whoever it is from Tordesillas (who, Smollett's notes tell us, really did exist, and really was written by that whoever it was). Occasionally, characters will talk to Quixote about that "Don Quixote fellow," not knowing it's him—or describing some other character, the guy from the pirated sequel, who seems to be impersonating him. (Quixote is understandably a little pissed about this.) He died for the first time at the end of Book I, but this time Quixote is good and dead, really dead, AND has given up chivalry, so even if a pirate-author managed to resurrect him, Quixana wouldn't go questing again.
Although Cervantes had good reasons to want to secure his franchise, that's not all that's going on. For one thing, Quixana may be dead—but Quixote isn't, at least not in the pirated sequels. The part of Quixote that was Quixana died, but that wasn't very much, because that part had already renounced Quixote. The non-Quixana part, though, is still wandering around in the Tordesillan's novel—and he seems to have had some good fun, judging from the stories that other characters tell about him. Cervantes' Quixote sees the difference between himself and the character he is in the fiction, too, when he goes to the print shop and watches people creating him out of type and paper and ink. So maybe in a way Quixana's death means that Quixote can't die, ever, because he's just a textual thing now, a fictional wandering phenomenon that other characters keep alive by reading and talking about him.
Cervantes seems to know this, even if Quixote doesn't. A couple dozen pages before Quixote's death, he and Sancho witness the faux-resurrection of Altisadora, the lady's-maid who pretends to be in love with Quixote at the Duke and Duchess' court, and who gives Sancho three of her nightcaps. She was pretending to be dead, but really wasn't. And there's an earlier wedding/suicide where the disappointed suitor pretends to kill himself and then jumps up with happiness when the bride agrees to marry him instead. So death itself is indefinite and porous—and besides, Quixote has already pretended to narrate the underworld that he found in that one cave he claimed to have explored, so there's no real reason why his story should stop now that he's dead.
The novel does stop, though. Killing Quixana was probably the best way to get the novel to end, but in a weird way that the novel seems actually to be conscious of, killing Quixana doesn't stop Quixote, and doesn't stop the story.
