I think the worst part is just losing the skills. I don't think it's a good feature and it's not fun from a game design perspective.

It's up to personalities. Some people like ultra hard core death games where you lose everything,

In my personal preference I would enjoy the death mechanic more if it meant it restricted the next level of progress by a negative amount rather than losing a level. From a maths perspective it can end up being the same effect or even worse depnding on how it scales but from a brain level dopamine reward system it would be more enjoyable. Rather than losing progress you've already made which negates all that effort instead it means to progress past your current point you need to put in more effort.

I think the difference between the two is key when it comes to motivation.