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Taking a cue from fate ( or how I interpret/play it anyway). I would generally treat it as a compel. That is to say inpiration would be used to prompt or reward playing in character when it is disadvantageous to do so. If players are actively seeking inspiration in combat to gain advantage I...

I personally like option C. I aslo started using the optional healing rules from the DMG (the one where you only get HP back by spending HD) in my last campaign to achieve a grittier feel.