When a player dies, he should go to a sort of limbo. A level that is kind of like the underworld, and if a player stays in this underworld, a preiest, or magi with the right skills could resurect him, otherwise he walks through a portal and creates a new charector (start over again with nothing.)
It should also be harder to kill someone, what constitutes of a death now should be more like unconciousness, where you can be robbed until someone heals you, or a Graal day goes by.
Again, not a perfect idea, but would certainly make alot more sence than having people re-spawning in the middle of everywhere.
It would also force killing to be more RP based.
Just a thought
Ray
