I thought I'd follow up with a post-game report.
5 PCs, all 3rd level started the night.
1 made it home.
In the end, after a 90 minute brilliant debate about it, they rejected the deal. In the ensuing chaos, two fled and got away through invisibility, a potion of gaseous form, and flight. One of those two was caught on the surface. The other three died down in the depths.
So, to answer my question, is it too lethal? NO.
Every trap has a logic behind it. Every encounter can be avoided. And most of my players, who do NOT take PC death well, all contacted me today to tell me how it was one of the best session of any campaign, any DM, they had ever had. The atmosphere of the first 3/4 of the adventure is just perfect. The players were getting up and pacing the room because they were to tense. They trusted NOTHING and kept waiting for the crud to hit the fan.
All in all, it went better than I could have imagined.