The death realm is meant to be the penalty for dying, not losing items in the living realm.
Ok trying to be creative here so bare with me, pinching some ideas from above too. When you die you enter the death realm as a ghost and either have your items with you or will when you return to the living world easy enough.
I like the idea of turning into a ball of ectoplasm so when you die in the death realm you become some sort of \'lost soul\'. As only ghosts can leave the death realm, players now have to replenish their health to become a ghost and leave the death realm.
To do this they get another bar on the health bar this represents progress to gaining ectoplasm or some other thing that will return them to ghost status again. These Lost souls can replenish this ectoplasm in a number of ways, they can kill creatures or other players to gain it. Souls can also replenish themselves in these fountains of souls (a place churning with other souls who have been there so long they have forgotten they were ever alive and fellow players) if they can find them (or perhaps they spawn in them?).
Adittional things that come into play are :
- Lost souls are little more then monsters clinging to a shadow of their former selves to represent this perhaps they cannot see ghosts names or show their own to ghosts.
- If a \'lost soul dies\' (its normal health is reduced to 0) then it loses some of this ectoplasm progress and respawns. Perhaps ectoplasm lost is left behind allowing another soul or even ghost to collect (as an item for normal ghosts).
- They can also no longer talk to anyone who is not also a lost soul (or perhaps restricted to chat only). Possibly at the 50% mark they regain seeing and displaying names to guild members who recognise them. This would allow expanision into making offerings to friends lost to bring them back.
- Lost souls treat other lost souls as if they were fellow players, they cannot attack them and can see names etc and may even challenge them to a duels over their \"ectoplasm progress\".
-Individual \'lost souls\' are weak creatures \'shadows of shadows\' they plague the death realm offering unscripted creature to avoid/fight. Venturing near soul fountains could become a risk.
- Perhaps even through consuming monsters and players to gain higher levels of ectoplasm and can choose not to return but rather become stronger death realm creature.
This might be a bit complex / irritate gameplay could be made a little streamlined. However I like the idea of expansion of the death realm beyond the easiest place to find in PS (you only need to die to find it

). I know they have great plans for the DR, player controlled \'monsters\' would be a kind of interesting encounter to (run away from

) find.