The Rambam (Beis Habechira 7 14) rules that one may not bury people in the old city of Yerushlaim.
What did they do during the siege in 1948 when they couldn't leave the old city? Where did they bury the dead?
And, in the event that they were buried there, were the corpses moved later?
The Rabbis at the time ruled that since the dead could not be moved from the Old City they should be moved into a temporary grave until an opportunity would allow them to be re-interned on the Mount of Olives. Unfortunately that took another 19 years to happen.
.. in the Jewish Quarter of the Old City of Jerusalem some 40 fighters and others who were killed in the battle for Old Jerusalem in 1948 had been buried in a pit there, because of the siege;
They were those who had been killed in the previous two weeks of fighting, but could not be removed from the Old City for burial because of the battles. Though burial had never been permitted in the Old City, the rabbis agreed that the situation left no other choice. On May 21, a pit was dug near Beit Rothschild, and 23 of the dead, which had been kept in the Misgav Ladach hospital in the quarter, were buried there. Five days later, another 11 bodies were interred.
The next day, May 27, four more Jews were killed in the battle. They were taken to the Batei Machseh complex, but were unable to be buried before they were burnt in a fire started by Arab vandals. They, and others, were later buried by local Arabs in the same mass grave. The bones bones of other Jews who were killed in the battles and possibly buried nearby were never recovered.
...in 1967, after the city was liberated and unified, they were reburied on the Mt. of Olives.
Source: http://www.israelnationalnews.com/News/News.aspx/123053#.UuTaP4f8LWQ
