I like the concept, this could be incorporated into the normal portion of the game and be selectable for the hard mode. In sense have a normal, Kind of hard and Hard mode to better meet individual play styles.
Having this as an option may address the concern that @AaronD had about the equipment level restriction and making a come back after having a single combat wipe during mid game.
Level Restriction for equipment really needed?
But not force it on player that enjoy and want the “Hard Core” challenge like @Doctor_Neth