I like the death system in Everquest.
When you die to a monster, you have to go back to where your corpse is to get your items (all of them drop, not just some) but other people can't loot your corpse unless you permit them to. In PK, the person who kills the other gets a choice of one item that they drop, the rest stays until the person who died comes back and picks it up. This might not work in PK areas in EL though, as someone could just get killed over and over again before they can get back to their corpse. There is also an experience loss, which i think is a fine tradeoff for no chance of getting your items stolen.
The Diablo 2 death system is good too.
You lose all items equiped on you, but none in your inventory. Other people cannot loot you. There is an experience loss if you are playing on the higher difficulties (you could make it so you only lose exp when you die after OA 20 or something if you wanted to incorperate this type of thing in EL). If you get back to your corpse, you get 50-75% of the lost experience back. If you log off and come back, your corpse starts back at where you log in so you can easily get back all your items, but you don't get any of the lost exp. back when you do this. I think this system would be good in EL (instead of corpses it would be bags, and when you log back in it could just automatically put the stuff back on you or have you spawn over your bag that only you can loot).
If experience loss from death does get incorperated, I think it should only come off of OA and not skills.