This is an excellent point. There is at least one place in the game where you have to die in order to continue to the next area. If anything, death is more of a nuisance that a game breaker because sometimes you have a long walk back to where you were once you are resurrected, but you always come back. This and the resurrection in Ultima are actually the predecessors to games such as Skyrim where death is a setback (in the case of Skyrim a very minor setback) rather than forcing the player to start from scratch.

Having your characters lose all their items is not fun. Therefore resetting isn't so bad.