If I as beneficiary of my mother's life insurance, give the proceeds to a sibling as reimbursement for funeral expenses, is gift tax involved?

I am not admitted in Pennsylvania.  I am sorry for your loss.

Part of your question is unclear.  Generally, the estate is responsible to pay for the funeral expenses when the deceased leaves assets. However, the relatives - or other parties organizing the funeral - become legally responsible to pay when they organize it.  Your Sister should be reimbursed from the proceeds of the Estate.  If you are reimbursing her then there may be more facts here - as to what is left in the estate , etc., - that are not given. 

As for the marking the proceeds of the life insurance policy as estate proceeds, I would not advise it.  Life insurance proceeds pass outside the estate and are not taxable, as you say.  I would seek your own legal counsel in this and tax advice.  Good luck.