Thanks for this great feedback, I'm glad you liked the game !
Yes the jail is probably the hardest area to go first, while it's still manageable you quickly need to buy some skills (especially some dealing magic damage) to be able to defeat the enemies efficiently.
Yes like you saw the jail executioner has an execute attack that can instakill you, however he only uses it when your hp are low ! (under 25hp)
And yes I found that there is a bug with out of combat items, sometime when you exit combat you have to walk a few steps before being able to use items again, I'm not sure what cause this bug for now and I will investigate, like you said it can be really annoying if you are close to death and bleeding, so I'm sorry for this unfair death.
Normally except if you play the game on another browser you should keep your save !