The classic 2012 herocraft style of raiding and looting chests, robbing towns/players dry isn't exactly the best experience for players that aren't great at PVP, and losing building materials while in your own town feels pretty bad. I don't really like the death chest system either, imo it just promotes camping and repeat killing of defenseless players. I'd be fine with death chests being removed.
I'd argue it'd be better for player retention for keep inventory to be applied universally(I know, not very hardcore), and for other incentives like high xp gains and a percentage of the victim's money to be incentives to PVP out in the open world, keeping my first paragraph of this post in mind. It's not exactly easy to hop back on the server and want to play after you get ganked and lose dozens to hundreds of hours of items because you decided to move your valuables through the wrong neighborhood at the wrong time. It's like the inverse of the "teach a man to fish" analogy, take away a man's fish and he'll be hungry for a day, but take away a man's fishing rod and he'll be hungry for life.
Also on PVP incentive: just throwing an idea out there, maybe with the return of town halls, they could also function something like the old PVP castles(this could tie in with the map-making competition I mentioned in my other post). Capturing or defending the hall would give an xp and/or item drop boost or a sum of money to the winning town scaling depending on how many raiders are there and how many town members are there. These boosts could be small, but able to stack if going on a defending/raiding winning streak. Failing to cap or defend would result in the boosts being reset to zero, so there is always an incentive to keep raiding or defending. There would have to be some kind of mechanic to make the fight a bit more fair for the raiders, something like whenever a town member dies defending, they get a debuff called "low morale" that lowers their max health until the raid is over, or something like that since they would be able to flood in by warping into town.
edit: I think keep inventory really comes down to an economy issue, the potency of its effect can be very different depending on where and how players can source items/materials and money, i.e. how easily replaceable items are, and to what extent we want the server to be hardcore. Gotta understand the line between so much risk that it's not worth even logging on and trying and so little risk that there's no sense of adventure.