Fate has other plans...
I have faced something of a similar problem, with one player who gets very upset when his character dies, or even comes very close to death (I mean throw his books down and storm out upset). I realize that many of you here would suggest that I should eject such a player or find another group, but we are all close friends inside and outside the game, and that is not an option.
I have an idea that I intend to use in all my future campaigns. I will disallow raise dead / resurrection magic as a spell effect (I will also disallow save or die type spells to maintain balance), but I will allow resurrections as a story element. I would handle it by explaining the general lack of resurrection magic to the players before the campaign starts, and also making it clear that by default, a PC who dies will remain dead. When a PC dies, I would encourage the player to create a new PC. However, I will also explain that when a PC dies, if the player is unhappy with the idea of creating a new character, then he may instead request a resurrection from the DM. I would make it clear that this is not something that should be abused, and that I retain the right to refuse a resurrection on any grounds. But so long as I feel the player was not being foolish or disruptive, I would work hard to introduce a story element whereby the dead PC would be resurrected within 3 or 4 gaming sessions. The PCs are supposed to be heroes after all, and it is not uncommon for a greater power somewhere to take a special interest in one or more of the PCs, even to the point of returning them to life if their fate has not yet been fulfilled. The resurrection may involve a unique quest by the remaining party members, or it may happen behind the scenes. This makes allowance for players who have a hard time dealing with character death, but keeps resurrection magic from becoming commonplace. Allowing a few gaming sessions to pass also puts the PC behind in XP, which approximates level loss without all the hassle of actually removing a level. While waiting for the resurrection, the player would be given an NPC to play or allowed to play a temporary character or cohort.
On the surface, this option may sound like a hard fit for a Midnight campaign, since there aren’t any good gods to return the character to life. However, it wouldn’t be hard to come up with other, more innovative ideas for story-driven resurrections. Perhaps the land itself groans beneath the rule of the dark lord, and has chosen a champion. Perhaps it is fate. The character was born under a certain sign and he bears a powerful fate that cannot be denied, even by death. Perhaps there is a powerful entity trapped on the world by the Sundering, and it has its own plans for the PC.
Anyway, this may not be the solution you were looking for, but it’s something to think about.