Hmm. I like the idea, but it might be tricky to get some aspects to work well. Would the players know from the start that their characters were dead (even if the characters themselves didn't)? It seems like quite a hard core feature of a setting to conceal if you were going to, say, publish it as a sourcebook. I guess the other question would be a "If we're all dead anyway, why does this matter" - will the players be rewarded by getting what they want in an afterlife, or?