Hey, I know your comments are from a year ago, but I really appreciate your detailed feedback. I just released a new update. I fixed the bug you found and made some changes, like being able to sell the ruby and giving the warrior a different item. Take a look if you're interested :)
Yeah, that's been tough for me to balance. I want the PC to be able to lose encounters without it being a full Game Over, but I also want the loss scenes to be fun. I'll think about that some more!