Of the options listed, I am most in favor of Item Duration loss.

However, ONLY if there is a repair function added to the game.

The concerns I can see even with this is...
Let's say you have a very fine weapon, and the very best armor you can get.
The repair function needs to be able to restore the items you have back to 100% of what they were when you died.
This will prevent complaints for the most part, and will be a way to promote further interactions between players,
if the repairs require things that only players can provide.

For instance, for a master washoe chest piece, master level parts you can buy off other players. Even new players can
take part in this by supplying armor or weapon parts, that can be used to repair gear with.

This will allow you to introduce death penalties, encourage player interaction, and provide a small money sink.

Second, Item loss as you describe it could be good too. Adding backpacks where revs can store multiple items they have looted off players will make it fun to hunt rev. Also this can encourage players to band together rather than just play solo, because som of these revs will become quite powerful, and the player may need assistance to get his items back.