My gaming group has been using a similar rule for a while now.
Whenever the Overlord knocks out a character the token is used to replace the character mini on the board as usual. But when the character is revived, the token does not go back to the player, but it goes to the Overlord. Whenever a player has no more tokens to replace his character with after being knocked out, that player stays knocked out for the remainder of the quest. After the quest players take the knocked out character back to Arhynn, where he is revived again. The character does not lose any items and does gain xp as if the character finished the quest regularly.
Because of this mechanic our playing sessions have become a lot more tense in a very positive way. Players tend to start of a lot less restrained, rushing forward and attacking critters left and right. But when a character loses two of his tokens, the playing tempo becomes more tentative. Other players try to convince the 'wounded' player to stay behind a bit more, protect and heal the character faster and overall tactics are definitely adjusted.
It almost never happens that a player is permanently knocked out, because players change their playing style and become more cautious. But last session it did happen for the first time, that I as the Overlord was able to kill the healer 5 times, causing a permanent knock out.
I normally wouldn't put all my energy in stopping just one character, but it was the only way for me to win second encounter of The Frozen Spire. I already killed him a couple of times by swallowing him with Ice Wyrms (so much fun!) during the first encounter, so I only needed to knock him out 2 or 3 times before he was permanently out of the game.
This became necessary because I just couldn't get past him and Grisban to open the doors and escape. To escape you need both tiles next to the doors covered, before they can be opened. Since I had 1-tile figures I needed at least one of them to go away for good, so I could put two figures there at the same time and have an action left to open the door before being killed. And who better to get out of the way than the healer.
I also had good luck because their scout had been knocked out by zombie Frederik and was way out of the reach for any his fellow adventurers to revive him.
So, to awnser the questions of balance and fun, it definitely delivers on both fronts. Balance wise, it asks the players to adept a bit more and gives their actions more weight. Sessions can take a bit longer, because decisions become harder and teamwork becomes even more important. But that's a good thing in my opinion. Also the Overlord has a bit more options when figuring out his tactics, but not so much more that it tips the balance. In my expercience cautious characters are usually harder to play against than when they are running around thinking they're invincible.
And maybe most important it adds another layer of 'realism' and excitement to an already very intense game. Also, as an Overlord, to be able to collect player tokens as trophy's and displaying them for all to see, instills fear in players and causes maniacal laughs from Overlords, which is always a good thing.
Edited by MrRoza, 05 November 2013 - 03:54 AM.