Idea for an alternative to dying:
How about, instead of actually dying, you travel back in time, to a few seconds before death, and watch the combat.
I envision this to be a spell, or power, that you cast during, or before, combat and when you are on low life (1-5 HP) the spell is activated. You are then teleported through space and time to a location just off to the side, and about 10 seconds before, so you can watch as your previous self is killed.
It sounds over powered, but a limiting factor could be an increasing, and permanent cost, to health, stamina, magicka, and carry capacity, so that it can only be used a limited number of times before you become too frail to enter combat, or even wear anything more than clothing and carry a loaf of bread and an apple.
I think the name of the spell/power should probably be something like Phoenix Power, or Power of the Phoenix, or some other such name.