Are you trying to say that all no-drop items are permanently lost? If so, it would be easier to write code to just run through the inventory and lose all items. To me, that would be more in line with such a hardcore penalty anyway. Would definately make dying an ouch. But you're going to seriously piss off anybody that tries to raid.
The games that have penalties such as that make it where no one wants to fight anything that isn't easy because the penalty is just too high.
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