I don't think they all died. Gunn & Wesley, yes. But there has been talk from Whedon, Marsters and co. about the idea of a Spike tv movie. There isn't anything concrete yet, but if it has been discussed, then obviously Spike made it through that battle. After seeing the episode, I kind of made my mind up that Angel, Spike and Illyria would have made it out alive.
On a side note, I would love to see a Spike movie, along with Illyria.