the Jester
Legend
Saeviomagy said:Unless you, the DM, are willing to be flexible in (re)gaining treasure, any character who loses all of his gear should, basically, retire from the party. He simply cannot compete against those high level challenges (unless he's a sorceror or something like that).
Having had an epic tpk that one of the party's cohorts (not with them at the time) managed to restore them to life after (with no equipment at all), I have to disagree. It definitely increases the level of any given challenge against them, but it's not so overwhelming that it's hopeless. I found that awarding xp as if the party members were 2 levels lower than actual worked very well to represent the increased difficulties they faced; YMMV.
Edit: On topic, the original poster and his group ruled correctly.