The BBC has a fairly thorough account of what was done with the body: Osama Bin Laden: What happened to his body?
US officials have given two reasons why a sea burial was chosen. First, that they did not want his grave to become a shrine. Second, that there was no time to negotiate with other countries to arrange a possible burial on land.
I assume that the rush to burial was to avoid accusations of dishonoring Islamic traditions. Of course, the downside is that the quick burial will help foster conspiracy theories about the events of May 1. But by the same token, said conspiracy theorists would have spun their tales regardless of what had been done with the body, so the net positive of not offending large numbers of people is probably the right way to go.
The avoidance of physical grave makes a great deal of sense:
"US officials tell me [ABC's Jonathan Karl] the last thing they want is for his burial place to become a terrorist shrine.
"To avoid that, an informed source tells me, the intention is to bury his body at sea – leaving no definitive location for the final resting place of his body."