This is one of the best ideas i've ever read on this forum.
I fully support it.
Also though, on semantics it would probably be server.
Many of the 'why nots' here are legit,
but this is a real case of THIS WORKS,
One server is not a money *****.
It's just a place for the masochists.
We've all got 40 character slots anyway.
My suggestions however...

Allow a player to be revived by another player within a set period of time.
This is reasonable and takes care of a few decent issues.

When the player is dead, that data is wiped from that server.
More room.

If the ARR server structure allows it...
Enable players to mail stuff from normal server characters to the death server character / vise versa. It's fair, so long as the player understands that everything held on death is deleted.