Keep things the way they are now...No Fix
Implement bound starter tools thatlast forever or degrade over time
Create Hardcore Char re-roll Timer of 24 hours
So you want less people to play the game. You are briliant in your dullness. You need to play a single player game. That way, you can gank and grief, and no one will be upset about it, and you won't have anyone to listen to you whine and complain.
binding your starter tools is the way to go- however they should still breakdown.
It's obvious you've not tried your hand at toolcrafting. I was given 92 recipes in tha last go round and there were few I could actually make-I needed Pliers(didn't have) or I needed a Chisel(didn't have)or I needed wooden handles. There was no way I could make new starter tools.
An even easier solution it to just implement starter tool recipes that EVERYONE starts with, that require basic materials to make. (ie - rock, twigs, grass string) Which also have a limited number of uses before they have to be remade, allowing everyone access to starting recipes, without imposing restrictions on the player. This also means that no player starts with any tools other than their weapon choice, and should also minimize the "spawn camping" by the PKers.