Honestly, LD could just be easily changed while still keeping the same flair to it. The only issue with LD is the 'all or nothing' bit; if they changed it to just a negative side-effect after WD expires, it would solve so many issues with LD.
Personally, if I were to design LD but keep its flair, I'd do this:

Living Dead: Grants the effect of Living Dead. When HP is reduced to 0 while under the effect of Living Dead, instead of becoming KO'd, your status will change to Walking Dead.
Walking Dead: While under the effect of Walking Dead, most attacks will not lower your HP below 1. During Walking Dead, all weaponskills and offensive abilities initiated by you will gain the effect of lifesteal (1:1). When the effect of Walking Dead expires, if 100% of your Max HP was not restored during the duration of walking dead, you will suffer the effect of Bleeding Out.
Bleeding Out: You will suffer damage equivalent to 1/4th of the difference between your maximum HP and the HP that was restored during the effect of Walking Dead. Duration: 12s.

Blackest night:
Additional effect: under the status of 'Walking Dead', The Blackest Night will also restore 25% of your maximum HP. Any 'The Blackest Night' still active on you when the effect of 'Walking Dead' expires will immediately break, granting you the effect of 'dark arts'.

This would place more control in the hands of the DRK, where in solo or low man instances they could contribute more to the healing requirement of walking dead, while also giving synergy with Blackest Night (which would make sense, given the job quest lore). This also removes the all or nothing condition: the healer could spend the extra resource or two to not have to deal with bleeding out, or they could just throw a single OGCD, let the DRK's attacks & Blackest night handle part of the healing, then deal with the DoT afterward.

the DoT is designed in such a way that it's not crazy invasive unless neither the healer or DRK did like, absolutely nothing during the duration of Walking Dead, but at the same time to act as a small punishment for not healing 100%. So if a DRK was healed 80k out of their 100k HP, then the DoT would tick 4x at 5k damage afterward