Right now players in instances are just rushing into huge battles doing as much damage as they can before they are blown away because they know in 10 seconds they will be right back there with full health and shields, but the guy they are fighting hasn't regened all his yet because he LIVED?
It creates a loss of any strategy play at at. If you are in an instance and die you should lose 10% of your shields and power and they don't return for that instance. For the rest of the time you are in that instance you now only have 90% of your original shields and energy and power.
If you die again you lose 10% more, now you re-spawn with only 80% shields and energy.
Repeat until you have died 10 times and you re-spawn at 0 shields and energy then your ship RESETS and you have to to SIT THERE and let your crew repair your ship from 0%. The "death" timer is now reset and starts at 100% if you die you lose 10% and this whole process Repeats.
Something of this nature would make players think about their actions when in combat and not just expend all their energy and blast away all their weapons knowing that if they die they will be right back there in 10 second and also WITH FULL SHIELDS AND WEAPONS ONLINE.
This method would make players really consider their tactics in battle because each time they die and fly back to you they have less power, less shields even to the point of the 10th death and 0 then they have to sit there for minutes while their crew fully repairs their ship.
This to me is the most realistic way to have the ships death penalty. It would make players actually become CAPTAINS of their ships other wise each death they are less effective and the bum rusher's would finally quit and start thinking of their CREW and SHIP and try do combat strategically so as not to get their ship damaged.