Jem

But the difference is that all your items aren't spewed everywhere and the whole despawning thing could take ages or not happen at all. I dislike the idea of a grave or your items spewing around where you died but that's just my opinion.

How about when your character dies, a lootable corpse of you character is spawned with everything you had in your inventory and hotbar. You'd lose some levels but it could depend on the difficulty. It could be quite cool if you leave your corpse for a long period of time you could have things in your inventory, hotbar and money stolen/despawn. This severity of how much has been taken away could depend on the difficulty as well. Or maybe a certain amount of lives depending on the difficulty?