This a nice shuir by Rabbi Gladstein. He says the Alshich says that Yaacov lo mes means that the faculties of neshomah cling to him and lays dormant (not that his body is alive).
What I find fascinating is that Yosef didn’t tell the people that Yaacov didn’t die because then they would turn him into a deity and worship him. This is similar scenerio to the Lubavitche who turned their rebbe into a deity who is supposedly running the world. They have to claim that he is PHYSICALLY alive, otherwise he is just like the other tzaddikim (if you consider him to be a tzaddik) who died and has no major deity-like superpowers.
Menachem Shmei said repeatedly that Yaacov is PHYSICALLY alive so that he can draw a parallel from his rebbe to Yaacov, both supposedly being physically alive. Yosef Hatzaddik, who saw that Yaacov lo meis, was afraid the Mitzrim will worship Yaacov so he told the mitzrim to embalm him (partially) and the reason he could do so was because he knew that his physical body had expired (despite his neshama still clinging to his body in a dormant manner according to the Alshich) But Menachem shmei is still saying that Yaacov is PHYSICALLY ALIVE just so he can “prove” his rebbe can also be physically alive…