I think permanent loss of durability whenever a character dies would be interesting death penalty. I imagine something like 1 point of durability permanently lost on a random equiped item would not be immediately punishing - it would take something like 50 deaths to significantly impact durability of a single average iLvl61+ item, but over time, it would introduce real wear to items and the need to replace them over (long) periods of time. It would actually encourage people to look not only for upgrades, but also for a second set of similar items. It is also beneficial to Blizzard as it would mean even seasoned/well equiped players will have to buy items on the AH once in a while.
I'd imagine that for a large amount of players this would reduce the fun on the game considerably...to the point of quitting the game entirely. The nature of Diablo has always been casual fun. Inferno was the attempt to make it less casual and one only needs to look at the amount of complaints over inferno champion packs and repair costs to see how much people hate it. It doesn't work very well. Hardcore is the perfect option for those who want to have a less casual experience
While i find this to be a terrible idea (if it were implemented in current SC that is), I'd welcome a 'mediumcore' where you lose all equipped items on death but keep the leveled char. Leveling is such a chore that it keeps me from playing HC; this would remove the tedium of re-leveling chars but keep the economy in a healthier state due to an effective item sink. Like on HC, you'd also have to make a strategic decision: do you stack all your best survival items on a char, hoping to never face death, or do you buy 'budget' items in the anticipation of an eventual death?
Before someone QQs about 'diluting the true essence of HC blah blah', as is the custom in these threads, consider that your precious HC would remain unchanged and this new mode would be called something else. It could be called LolCasualHCNubland and I'd still play it.
Its a great idea, but the game dont deserve that. I would implement this kind of idea in games where you have much more Item/Gear/Skill diversity. D3 is just too dumb and easy for that kind of concept.
Perhaps you could try to get a job at Blizzard. It would perhaps boost RMAH profits. If players must spend even more money when the items they are using are starting to become broken... Also it would make it possible for Blizzard to control the number of items being in the game. And overpowered items would eventually no longer be in game if the dont drop anymore. When the last overpowered item is broken the problem will be over.
But a lot of players would not like it at all. And the fact that it would help Blizzard to both better balance the game and to control RMAH-prices would just lead to people complaining. They would think it was done because of greed. I can imagine a lot of people would no longer want to play.
It would probably be to much, IMO. To many players are complaining already.
99 out of 100 players would quit if this were implemented (even though almost that many have already quit.) It's a 180 step in the opposite direction of where this game should go. Players shouldn't be 100% dependent on the AH. They're already close to totally dependent on it, and that's a huge problem. It externalizes a core aspect of gameplay.
Thanks to each of you for your opinions!
I can fully understand people who spend real money on the AH to feel bad about losing it. I also see people complaining about huge repair bills (which I don't understand at all, because every run I do, I bring much more gold in then I pay for repairs, even if I come to red durability levels).
In the absence of ladders or other ways to get rid of items in the long run, the (SC) game will sooner or later come to the point where everyone and their mother can do A4 runs, but there will be no purpose to it as everyone will be overgeared anyway. Introducing very slow but permanent item wear (and only based on how much you die) would benefit the players. And if someone wants to QQ, it's not like this would be the only reason
Edit: nowadys people just buy their 1000 DPS weapon on the AH, and after that consider all 990 DPS weapons crap. But imagine how nice it would be to find another 1000 DPS weapon and knowing that even though it's not an upgrade at this time, it might be useful sooner or later to replace your current one. It would restore at least part of the fun of finding gear. At least for me.
I agree that dying has a rather low penalty, but losing items or a permanent loss of durability would be too much of it. If the penalties are to be made tougher, I would prefer a loss of XP (but not a level loss if they drop below the minimum for the current level). That wouldn't be an issue at L60 anymore, but you already lose the benefits of NV upon death when playing in inferno.