How to deal with Death

I'm starting a new campaign with some old friends of mine here in NY. Most of them have had no experience with any kind of roleplaying before and I'm not sure about one guy, he may or may not have had previous experience. It's great to be in a group again, even if they do take things less serious than my previous group. I'm taking a different tactic with this group, however: I'm going with the goofiness instead of trying to corral it. Hence I think Encounter Critical would go over really well. As it stands I'm breaking them in with Castles & Crusades - it's fun, it's easy and it's not D&D. 

But I want to be ready for the inevitable death and here's what I got. I'm taking a page from Burning Wheel, and when death is unavoidable, I'll give them a choice: you can die, roll up a new character while the rest of the party finishes the scene and jump in at the next scene; or you can have Fate step in and save you, regain 1/4 hit points back, but the situation gets worse - much worse. The very important MacGuffin you were carrying? It fell in the river of lava you were crossing. Killed by an orc axe to the face? The orcs rally and gather more orcs for the fighting. You get the picture. If you live, it should come with a major sacrifice. Hell even losing a coveted magic item would be sufficient.