Reconsiderations on Character Death

Through our most recent games, and through recent player feedback, it has appeared that a very important game mechanic has been missing from Mystic Crossroads. Something that undermines many, if not most plot and character interaction. That thing is fear of death and its consequences.
This wasn't exactly an oversight by us as writers. My partner and I come from a game background in Amtgard and spin off games. These games, and others, are designed very well as mass combat systems. Dying part of the game and happens constantly. And I mean every ten minutes or so if you're a typical player. Dying is easy, and really no big deal. Don't get me wrong. The combat systems we found in these games worked worlds better than the LARP games we ran across. They were just… murderous deadly.
Though we tried to make our game less so, we knew death would be a regular part of the game. What we didn't want to do is make death so costly that players were afraid to fight. Combat is a fun part of the game we were making, and dying is just a part of it. So we wrote Mystic Crossroads expecting battlefield deaths as normal and gave everyone four lives to spend in every game.
What we didn't know is what were giving up by making this choice. Outside of a battlefield death is not common, but when death happens it is done with purpose to plot and should effect those killed, and those who commit the killing. As it is the act means nothing, the dead character comes back in ten minutes. There is no fear, no shock, no consequences at all. No punishment for killers, and no way to punish, because nothing matters. This can't continue and have a worthy game.
So we must create a more deadly game than we have been playing. However, I'm not interested in the increasing threat of total character death that other games have. It favors the skilled and punishes the unskilled. Instead I'm considering the following. There are two kinds of deaths that characters can experience; significant and insignificant death. Insignificant deaths happen on the battlefield or in skirmishes and do not have impact on plot. They will continue to be as described in Mystic Crossroads Rulebook.
Significant deaths, however, are ones deemed to be plot significant by the Game Designers or referee. Characters sacrificed in some ritual, killed in a duel, or given a prison sentence by a noble for criminal acts take a significant death. They may return to play only at the next event, or in ten minutes at the cost of four character points. Players should consider bringing a change of costume to play another character if they take a significant death, so as not to lose their character points. This game rule sounds harsh, at least to me, but it allows players to manage character deaths without taking permanent penalty unless they chose to burn character points and possibly be on the run from their enemy for the rest of the game.
Since this is a major change to rules I wanted to put it up for discussion before making it part of the game. Please take this opportunity to tell us what you think about death and fear and losing character points vs. possibly losing a character.