This one element could fundamentally change the game.
Under my proposed system, after a character's first death a player really has no idea if any battle is going to be the last for their character. Every additional death increases the risk of not coming back, and if you do come back, the chances of returning with a battle scar grow more likely as well. I think this is more "realistic", I'm not going to say that this is more simulationist because people get a bit revellious when controversial Forge terminology gets bandied around (especially when everyone has a different interpretation of what those terms mean). But I do feel that it tends to simulate the uncertainty of life and death, sometimes things go bad, sometimes you die, sometimes life is meaningless. At least in this system there is a general inderstanding of the risks, during the earlier healing sequences there is a better chance of survival. During the later healing sequences, there is more chance of staying dead. The Players of characters who've died a couple of times will start to be more cautious, but it's a gradual thing.
Conversely, in Ben's suggested option, you randomly determine if a recovery is going to be your last. This means that for most of a character's life they'll know full well that they will walk away from the next battle (possibly scarred, possibly unscathed). But then there will be a single dramatic switch point in the narrative. Once the player knows that their character has made their final recovery, they similarly know that they will not survive the next time they are taken down. After this switch point, they may take a cautious option to avoid getting in further conflict at all ("I used to be an adventure until I took an arrow to the knee"), or they might engage conflict as dramatically as possible to go down in a blaze of glory. Either way, they know that destiny waits for them. This isn't as "realistic" but it's great for narrative construction, it might be considered more heroic.
So that's where game flavour could really shift based on a very specific choice. Most players probably wouldn't even notice it at first, but with ongoing play it could become something that constantly feeds back into itself to become blatantly obvious through play. It might be interesting to offer both options to players, perhaps the first option for most players (at the whim of an unknown destiny), while the second option applies to mystical characters who are capable of manipulating destiny and the subtle forces of the world. Or maybe secondary characters use the first option, while primary characters (who have a stronger destiny) use the second option.
Hmm... More to think about.