A huge afterlife maze/quest queue takes time and devpower and the goal was IMO that players try to get
not killed resp. to increase their "fear" of dying, so players behave more providently in dangerous situations.
But you can not just punish killed characters uber-hard because there are many situations in which you can get killed (e.g. the lag on purpose fighting system).
Unfortunately, almost every more complex idea mentioned here seems to be more or less impossible according to the devs (it seems that the client/server is highly nonflexible?)

...
Actually, if your HPs fall to 0, you turn into a ghost. In RP aspects I think it must be seen as your character really is transformed into a bodiless entity between life and death. But because your time has not come yet, the gods give you your old body back at holy locations - you are alive again, but wounded (this must be official):
Your HPs are still almost zero, your physical attributes are lowered for an unknown value and amount of time (bottom end/30min? Are skills lowered, too?) and you have permanently lost some skill points (randomly?) and have dropped some items where you died.
Because K.O. systems are hard to realize, I would suggest to put in a low downtime in which you can not come back to live. If you die again within a certain period of time after resurrection, the downtime is increased and also the skill loss. To avoid reskilling, maybe make the ghosts invisible (only visible within some tiles, e.g.).
I can't think of a way at the moment where PG/PK fighters will be frightened of death
and "normal" players won't get frustrated by hard death penalties. So, time penalties are the way to go.
PS: But more important is the newbie island or in general a focused development (the most people do not now on what the devs are working).