They were considered dead after they "went missing" during the Invasion of Japan, not when they were sent there as hostages.
As for your question on Nunnally's reappearance in the public, easy: yet another Code Geass plot hole.
This one isn't half as bad as Kallen never showing any surprise at Lelouch's past though.
Having said that, Nunnally surviving doesn't necessarily translate to Lelouch surviving in Britannian eyes either. Of course, logically, some ambitious noble already considers that possibility and is probably now searching for the missing prodigious prince to use as a political pawn; but this is anime, and I watch it from the assumption that nothing happens unless it's actually explicitly told, so nothing of the sort has happened so far as far as I'm concerned.