Why is my NPC Wizard cursed with immortality?

[Tonguez]

He challenged Death to a game of dice, wagering his Life. He cheated and won but not without Death noticing. Death then got the last laugh, he allowed the Wizard to keep his Life, but claimed his death as a 'special compensation', Death now wears the Wizards death in a trinket around his neck.

 

[steeldragons]

He became too powerful. The god/goddess of magic (or all of the gods?) feared that if he should slip his mortal coil, he would challenge and/or could easily defeat them and claim divinity for himself (and, perhaps, that was this NPC's intent some time ago). By cursing him to constant resurrection/reincarnation -and falling apart- his power must be directed elsewhere -as you said, to keep his body from falling apart, and I would suggest/posit his mind and soul, as well. So, the god/gods responsible for his curse are "saved" from his usurping their authority (or so they believe/has worked so far).