We are writing a dedication in the form of an epilogue to honour our colleagues who recently passed away. Both colleagues have substantially changed our field and we believe they deserve to be honoured in a paper that will be published soon so that the next generation could read it and will always remember them. However, one reviewer wants to remove it and placed in the 'acknowledgement' section. Any advice?
This sort of thing is really up to the editor, not the reviewers. Reviewers are to assess your paper on scientific/academic grounds. The proper position or appropriateness of an epilogue is not really their purview, it's an issue of journal style (though I also don't find it wrong that they commented on it; effectively, they are helping the editor by 'flagging' this for their attention, kind of like is done on StackExchange). To me, the acknowledgment section seems appropriate if it goes anywhere, but I'm not your editor.
If you will be writing a response to the reviewers, thank them for their opinion and inform them you will be consulting with the editor, and do so. The editor could prefer you remove it altogether, place it in the acknowledgment, or suggest you submit a separate entry in some other format, for example to appear as a comment on your paper in the same issue.