I'm using Permanent Death in the Highest Risk/Reward PVP Tournaments and Raids. Participants for these events are made fully aware of this risk up front. Its the highest gamble of Skill/Wits/Dedication and those who take on the challenge will bring their emotions with them and that's a desired effect. Participants that meet their fate in these events have their Character names engraved in a Memorial, while characters who are successful have their Character names etched into the Lore of the World and become Legendary.

That actually seems like a fairly interesting kind of premise. A winner takes all "are you sure you want to do this? > are you really sure? > are you really really really..." and your reward is exactly that a trophy of being forever recognized as someone who took on such a monolithic trial and reigned supreme. I see it sorta along the lines of Vanilla WoW with the (to my knowledge) 3 victories against Kel'Thuzzad. He was bloody bloody hard. To get to and to defeat.

To replicate that in a 1 v Dungeon "your character, if defeated will never be rescued or ressurrected by the gods" would be pretty excellent. While also leaving you with the choice to just not do it and keep your character and have it never bother you ever again.