I think that they should keep the loose everything when you die thing, it makes it punishing for failing and rewarding for surviving!
It's a concept that works really well for Don't Starve (and its multiplayer counterpart) though. And I'd identify this game as closer to Don't Starve than Minecraft. If the perma-death really bothers a lot of people, the devs might (if they feel like it could add to the game) make it a option, like how Minecraft has the UHC/Permadeath option.