if you die >3 times, reset the Quest so you have to start over.
In most Arcade Games (think Asteroids) you have 3 lifes so why should this be any diffrent?
Very easy to implement and gives you a very good reason to stay alive.
In most missions you will not die anyway... maybe one time. If you have a real bad time twice.
If you die a 3rd time you have realy deserved to restart and do better, maybe come later with better skills and try again?
The hard Missions would gain a lot of difficulty and by the ammount of easy stuff we have now in the game it would not hurt if there was a little more difficulty to keep the Hardcore Gamers entertained.
One problem, what happens when you group to do a mission? You don't respawn and you loose everything? Or you have to sit there and watch the rest of the group play?