Well, it could be quite an interesting sight. Loki might find the zany and unpredictable nature of Looney Tunes fanfiction either highly amusing or completely bewildering. Maybe he'd be intrigued by the creative interpretations of the classic characters and the wild storylines that fanfiction often brings.
Yes, it is quite popular. There are a number of fans who like to combine the two concepts. They love to see how the heroes and villains of Overwatch would fare in the intense battles characteristic of Death Battle. There are various online platforms where such fanfiction is shared and discussed, which shows that there is a significant audience for it.
Well, 'sonic watches death fanfiction' could potentially be about Sonic the Hedgehog witnessing a death in a fan - created fictional story. It might involve Sonic being in a situation where he sees another character die, perhaps in a battle or due to some tragic event in the fanfic's unique plotline.
A female Master of Death in such a fanfiction might have a complex backstory. She could have been an ordinary girl in one of the universes, but through some extraordinary events, she gains the title of Master of Death. In relation to Harry, she could help him understand the true nature of death and its implications in a way that Dumbledore couldn't. With Loki, she might be both an ally and a source of mystery, as Loki tries to figure out how to use her powers for his own ends.
Typically, it might feature the characters from strq observing the intense battles in Death Battle. There could be a lot of reaction elements, like shock, excitement or analysis from the strq characters.
Yes, it likely exists. There are fanfiction for all sorts of combinations in the world of fandoms. Since both Spiderman and Death Battle are popular topics, it's very possible that someone has written fanfiction that combines the two, and Spiderman could be depicted as reading or being involved with such fanfiction within that fictional story.
Thor might initially go into denial. He can't believe that Loki is truly gone. He may hold Loki's body for a long time, as if waiting for him to come back to life. Then, he could become angry. Angry at the situation, at whoever or whatever caused Loki's death. Eventually, he may find solace in the memories of Loki. Remembering the good times they had together and using those memories to move forward.
There are often fanfictions that involve crossovers in 'watches death battle' scenarios. Imagine a battle between a superhero from the DC universe and a powerful anime character. These crossovers can lead to really exciting and unexpected plot twists as the different power systems interact.
Maybe Spiderman gets some new combat ideas. He could see some unique fighting styles in the Death Battle fanfiction and incorporate them into his own superhero battles.