Natsu would be extremely angry. He is very protective of his guildmates. Levy's death could fuel his rage and make him go on a rampage against the enemies. He might feel guilty for not being there when she needed help. As for Erza, she would take Levy's death as a sign of her own failure to safeguard the guild. She would become more strict in training the members and more vigilant in protecting the guild from future threats.
One possible scenario could be Levy getting caught in a powerful dark magic spell during a battle. The spell slowly drains her life force as she tries to fight it off but fails. Another could be that she sacrifices herself to save her friends in the Fairy Tail guild. She might jump in front of a fatal attack meant for one of her beloved comrades.
It depends on the specific fanfiction. While the base material of Dragon Slayer might not have Levy as a Dragon Slayer, in the world of fanfiction, all kinds of alternate storylines are possible. Some writers may see her character as having the potential to take on this role and create a whole new set of adventures and relationships around it.
Makarov, the guild master, could also be present. He might see Levy's sleeping as a sign of the guild's youth and innocence. He could be reminiscing about the early days of the guild while looking at her sleeping form, and then make decisions about the future of the guild based on those thoughts.
It's possible that Levy is getting emotional. If the story has a touching plot, like a story of sacrifice or friendship, Levy, who values her friends in Fairy Tail deeply, could be moved to tears or have a warm smile on her face as she reads on.
Gajeel could be a great character to pair with Levy. Their relationship has always had an interesting dynamic, with Gajeel starting off as a bit of a rough character and Levy being more gentle and studious. Another option could be Lucy. They are both female members of the guild and could have a story together where they go on an adventure and use their different skills to overcome obstacles.
It can show her vulnerability. Levy is usually seen as a smart and capable mage in Fairy Tail. But in an embarrassing naked situation, her confidence might be shaken, revealing her more vulnerable side. For instance, she may become shy and reserved, which is different from her normal assertive self when dealing with books and knowledge.
Natsu could be a great addition. He could be the fun - loving uncle figure who always gets the baby excited with his boisterous personality. His presence would add some humor to the story, like when he tries to teach the baby some of his fire - based magic tricks in a not - so - safe way, and Gajeel has to step in.
There might be emotional challenges too. Levy could be worried about how motherhood will change her life and if she'll be a good mother. Gajeel may also struggle with his own insecurities about being a father.