When the player lies dead in his own blood a screen should be shown informing him of his defeat.
Afterwards the main menu should be shown and the character is no longer available.
Possible text.
"Your quest has come to an end.
No one expected you to succeed in your quest to save the world. But still, there was a whisper of hope.
By your final defeat you have silenced that whisper even more.
Pray that there is one somewhere to succeed where you could not. If not no one will be left to even remember your failure..."
With the change to network code this is open again.