Ok. So, considering the nature of this question, I think I should take it in 2 parts.
My personal reaction would be to ask how it is that one player can cause something like that. If the answer is hacking, my next question would be how he expects us to be able to do anything about that, because a hacker who can shut down the game probably has the ability to manipulate spawn location or even his level or gear. Only an idiot would go after a hacker if they aren't using hacking cheats themselves.
I'd also question why it is that the admins haven't just banned the guy already if he's responsible for this. A method like this is either a fool's errand or a witch hunt. If what they claim really happened, then this is something for the admins to deal with, not players.
That said, level-loss on re-spawn is another player-loosing game mechanic.
The simple answer is, they absolutely wouldn't design a game that has mechanics they know from previous research would loose them players. ESPECIALLY if it is the first VRMMORPG. They are taking a risk by being the first to the scene, so they would do everything they could to play everything else as safe as they possibly could. That's how business people think.
Also, no, "feels like a second life" absolutely would not be enough to save the game if it has incredibly unfair mechanics like unfair split of EXP and the devil's triangle of PK allowed, level loss on re-spawn, and spawn-point camping.
I seriously think you should look at Phantasy Star Online and the problems that game's online servers had before you even consider writing something like this. That game, despite truly excellent game-play, basically died as a result of mechanics that were just a little less unfair than what you are describing right now. There was no level-loss, but dying caused you to drop 1 piece of your gear. PKing was not allowed, but hackers managed to figure out a way to allow their spell damage to affect other players. Re-spawn always happened in the safe-zone, and players could make private partitions for just their group to go down to the field, but hackers found a way to hack into their private rooms.
Ultimately, it was just that gear dropping mechanic that caused 100% of the problems. If they did not have that, it would not have incentivized the hackers to do all this malicious stuff that lost the game a lot of players. And so, the sequel, Phantasy Star Universe, fixed all those problems using the money they'd managed to earn from the early days of the server before the hackers figured out all these malicious tricks that trashed the game.
What you are talking about here is allowing your players to just have access to the abilities the Phantasy Star Online hackers did, except you are making it an actual part of the intended game design instead. The PSO designers never meant for their game to turn into what it did. That was all hackers, and they were in a panic to fix those problems once they were discovered. They knew it was bad for the game. So, there is no way any game designer would be so stupid as to think it's a good idea to actually build the things PSO hackers did into the intentional design of a game.
----------
EDIT: Really, a guiding rule to figuring out whether or not the game you are writing is in any way realistic and a good design, you are going to have to ask yourself one simple question.
"Would I have fun playing this game?"
If it has unfair mechanics like the ones you are describing, I would never even pick up the game in the first place. I wouldn't even give it a first look. It would have a bunch of people who rage-quit the game in the first few weeks after it's launch, and a lot of potential customers would hear these bad reviews and never buy a copy in the first place as a result.
You can't think about whether or not it caters to what you want to do with the story telling. You need to ask whether or not it would be a game that would be fun to play and if it is a game that would make money for the developers.
If you want an example of a web-novel/anime that did a THOROUGHLY good job of designing an actual good game that also catered to good story telling, look at Bofuri. Yes, the protagonist actually did completely break that game, but it was because of loop-holes and oversights in the game design, and the protagonist just had a habit of repeatedly finding these loop-holes by being a lovable and impulsive cinnamon bun. When she found these loop-holes, the game designers added a patch to make it so that exploit was no longer possible. The protagonist got to keep the broken skills she earned, but nobody else could ever acquire the same skill via the exploit she used again. Some of her skills even got nurffed by the designers after it was decided they were WAY too OP as she demonstrated them in use.
And, aside from the occasional loop-hole the protagonist keeps discovering and exploiting by happen-stance, it actually is a rather well designed game for a web-novel based MMO.
Well, here are a few more questions from me:
1. Would you play Satisfy, the game from Overgeared?
2. Do you think the mechanics are fair to common players?
3. Do you think it share similarity to Royal Road, the game from Legendary Moonlight Sculptor?
I am asking all these questions is because I have used them as reference for the VRMMORPG story I am trying to build, namely the gear drop, the PK and the monthly subscription to the game. Hilariously I myself will not play the game solely because of the last point.
Also, the MC in my story isn't a hacker, its worse, he has an agent in the game company. If you have not read Master of All, thank the seven heavens because it is such a wish fulfilment story that I myself should never had used it as one of my reference point. The Nova Terra Titan helped detrimentally too during the planning process when I am churning this joke of a work.
Both MoA and NTT share the same thing; crippled MC whose disabilities becomes their superpower ingame, the latter is having gigantism while the former is a legal shota with a horse cock due to "parental abuse". Both MCs are insanely rich and they have a bunch of women to help them fight their RL battle because ingame they are kings, not so much when reality hits. Imho both books are terrible to the point that you can only read them as jokes, the plot literally revolves around the two and just like Grid, the player base is hounding for their expulsion because of how gamebreaking their existence are.
The MC I chose is neither a hacker nor some debt ridden guy like Weed or Grid who joined the game competitively for a higher cause, rather he is a rich prick who got enticed into the game because of the so-called realism. His monthly subscription is enough to be approximately 0.1% of the company's monthly revenue when there are around one million players (how I try to achieve this is I DUNNO) per month. So for this fat whale, he was assigned with tons of benefit like a cash shop to buy exotic materials plus restrictions like "not allowing to interact with normal players" and the game company specifically isolates these cash players to an area. Cue MC fucking up the economy and relations of NPCs in the gameworld because he can throw money to the problem, he still gets fucked alot by rankers though as most of them see him as a fat pig to be slaughtered with items to drop.
I have not yet read Bofuri and going through the wikia, I can conclude that Maple is luck based like all the MCs in other works too. Though it is said that a player can still put her down as the end boss, the said player is Pain, the top player of the server with SPECIFIC EQUIPMENT. I still can't find anything that speaks for the normies, but judging by how active the game producers are on balancing the game, I
think that at least the game is balanced.
The lack of normie view is what giving me doubts to how fair the game can be and I have shivers recalling how Grid ruining a class quest of a player just by speaking to an NPC. At first when I read the chapter, I thought of how deserving the normie player is because of how he plans to defile the waifu on previous chapters. But once I think about it, how Grid decides to ruin the player is solely because he didn't like the guy standing next to the waifu is scary.
This is different from how Grid deals with the backstabbing psychiatrist, the PK guild and the single merchant, these examples exist to go against Grid, like the psychiatrist hunts MC down pathetically for his class quest and petty revenge, the guild because they go after top players and the merchant is actively harming the NPCs required for Grid's quest. Naturally the three examples are horribly screwed over by the titular MC with the first example's character got destroyed, losing all the levels and the rare class. The guild got disbanded as they are hunted down like dogs. The merchant suffers under the unfair trade agreement where he needs to work for Grid forever. The three examples can be said as deserving because they go against MC, but what about the random player who lost his entire character because MC didn't like him? At first the rando got angry that Grid is a prick, then he becomes afraid, very afraid of Grid picking on him.
For context, the rando and Grid only meet up once and that is when Grid meet up with the waifu to talk about overthrowing the empire they are in. Granted, Grid knows that players are agents of chaos so he told to himself that he must end the man's career to not get screwed over because of a tattletale.
This distorted sense is troubling for me, where the MC and his gang is thriving while the rest is in deep shit.