I like option 2. It adds to the skill factor that dying has meaningful consequences. If there is a custom weapon? That should stay, how to make that happen is not up to me. I also feel the weapons you did drop should be up for grabs. Have a friend pick them up, or keep them safe for when you return.
Your thoughts on my thoughts?
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I think what you're saying sounds really fun and quite exciting. It would up the pressure and make the player more cautious.
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Maybe get a special armor unlock if a team mate with less than 25% health, picks up your gun and makes it out alive 100 times.