My bet was the headstone was approved under the assumption that it would be a carving on a regular headstone or a much much smaller statuette, then when they saw this thing at real size very quickly realised how wrong that (otherwise very reasonable) assumption was.
Either way, seems to be a few facts being confused here, so to hopefully clarify;
1. they are not a child, they are a 3 tour war veteran and it is a war vet's graveyard
2. the deceased didn't pick the headstone for them self, their family did it.
3. the cemetery offered to pay for the original tombstone and pay for it's replacement, so it's not a case of 'well they were happy to take their money and now they're just being asses'.
I realise people are feeling like the family has been hard done but but really... they are indeed being kinda selfish and definitely distasteful by sticking something so gaudy in a cemetery shared by others, let alone a veterans one, even if the cemetery initially(accidentally) approved.
Many see/treat cemeteries as respectful solemn places, so as numerous people here already pointed out it would be a simple task to have a more regular tombstone with this image as a engraving, or to shrink down it's size, so that it remains respectful to those around(who have just as much right to have their love one laid to rest how they want, including not being buried near a rather unfortunate sponge-bob rendition.)
If the situation was reversed, the cultural majority having whacky cartoon character tomb stones as their way of showing respect, and someone decided they were just going to have a rectangular shape headstone with just some writing, it wouldn't be unreasonable to assume that would/could be seen as disrespectful, and be treated similarly to what happened here.