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This is a game and not reality. I really don't suggest trying to make this game like the "real world". I play games to get away from the real world.

I like that the guards kill them fast. Let's hope this works for much higher level outlaws as well. I'm not sure what level the npc guards are.

You must have been playing non-stop to get to lvl 10 already.

This is a great idea. +1

I feel that health should regenerate. Especially since when players die they lose multiple or all items in their inventory. Makes one very hesitant to venture out to collect materials for crafting. Or at least make health potions available. Affordable health potions.

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Yes you are correct. Dexterity also increases dodge chance. There is no way to reset stats or skills so be careful where you put your points.

I also noticed that when I died from both players and monsters that I dropped items.

Stats work differently in this game. For instance dexterity works way different. Dexterity doesn't help you to hit your enemy. Be very careful where you place your points.