Heres a few quick features on the game to help yolu understand where I'm coming from:
Large magic presense in game world
Gods and Deity system(granting gifts and bonuses in exchange for worship)
Not a traditional leveling system
Player focus more on "family unit" and "family legacy" as opposed to single character
Anywho, death. Lets say you're strolling along a long way from home when you happen upon a bear cave. Well lots of fire later, you conclude it was not in fact a bear cave, but a dragon nest. But seeing as you're dead, there's not much you can do about that dragon. Right? Well, I have a few ideas on how to treat death to simutaniously punish and reward them depending on their goals.
Upon death, you get transported to another world, it almost mirrors the main one, but with a few differences. The way you view the death world depends on the main deity that you follow, and those that follow other deities who are also dead would appear hazy and distant to you, like a shadow. The only beings you would meet here are all dead.
From the spot where you died, there is a very clear and safe path(though not straight, more windy) leading to the deity's closest alter where you can be resurrected. However this death world is robust. There are many spirits here that can offer you items and abilities not usually found in the normal world. Some items may even just be lying around *just* off the beaten path. Maybe there is a spirit nearby that can help you get revenge on that dragon... in exchange for a price that is. However dying here would mean permanant death.
Not to worry though! If you've had a kid at some point, your deity would come to them and transfer your knowledge to them in exchange for your service to them, but not your on-hand belongings which can now be lost either in the death world or on your body dpending on the deity. Children would need to level up abilities, but would have an easier time doing so. Leveling in this game is closer to say, raising your strength skill to be able to pick up and swing the sword the way you know it should be done. Leveling the body to it's "limit" would only take 20hs or so, so a casual player a month or so to do and a hardcore player a weekend. Just enough to hurt, not enough to discourage play. The kid would also get bonuses depending on the life and death of the character both in skills, and from NPC's(hey I knew your father, great man, have this free thing on me).
My hope is that a system like this would cause death to be annoying enough to make those far from home be careful about their explorations, but interesting enough to make the risk of "permadeath" worth it. As well as add an entirely new element to the game, which would fit well into the world if done well.
My worry is that people will form too close of an attachment to their characters and not risk the exploration, though i am trying to make the focus less on the individual character you main, but on the family as a whole. (all of your "alts" can be in the same family, stays at home as NPC's when not being played and semi-controlable(hey brother, take these supplies, can you make X for me?). I know people are going to have multiple characters, and I want to incorporate that somehow into the main game to help the idea of letting go of a character to permadeath.
Thoughts? Comments? Ideas? Does this seem doable with some work?