It definitely stays on after death. I'm a sacrificial THF myself and find myself eating dust constantly. Since I only have TH gear on at start, and occasionally get a proc, I have TH6 or TH7 on. I immediately equip TH3 gear (= no TH gear) and then sometimes die. I also immediately get up (powered by Apocalypse) and keep doing my meele/SA/TA thing, and I've never seen TH reset, in fact, I remember several times where I managed to increase it further.

The x-times roll for THx theory is most certainly wrong, and could be disproved by some very simple and short tests. Get TH6 on and kill some things with low drop rate for certain items. This is equivalent to saying you get the same results from fighting a mob x times. Imagine TH6 on Fafnir, it would be like fighting him 6 times and merge the loot pools. It even sounds very unlikely, just consider TH6 for the moment and what it does. 6-times reroll would turn 5% drop rate into 25% drop rate, 10% drop rate into 50% drop rate, 20% drop rate into 75% drop rate. So 1 in 20 drops would turn into 1 in 4 drops, 1 in 10 to 1 in 2, 1 in 5 to 3 in 4. Not to mention higher TH tiers, TH10 would turn a very rare 10% drop into an extremely common 66% drop (1 in 10 to 2 in 3). This could be tested very easily, if someone who actually believes this wants to try it. I'm pretty sure it's wrong so I'm not gonna bother personally.

As to where it caps.. a friend of mine managed to get TH11 on Bukhis, I'm not quite sure if he had TH6 yet back then. I'll have to go through the logs. Also, how is (Base + Gear) x2 calculated? Based on current gear? Then I believe we'll see an increase in THFs fulltiming TH. And that could be disproved easily, in fact, I have. I triggered TH7 lots of times without any TH gear (TH3 base) so that's not it. The gear you had on at start? If that's it, it would be hard to prove, but if it's not it, should be easy to disprove. Have someone engage with TH3 and keep meleeing, hope to get TH7. It should definitely be possible, I've seen TH6 proc lots on NMs I didn't care about the drops on, so had only TH3 equipped. I'm not sure if I saw TH7, but if it's possible it shouldn't be hard to reach.