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If you were to go into IA with such high stakes, then presumably you'd bring a well rounded character, but then you'd risk losing the character, along with all the hours and effort you put into levelling/gearing them (and you'd lose their gear as well). It would have to be a pretty spectacular reward for such a risk, and in practice I don't think many players would level a toon, lose them, then re-level a new one to try again, and so on.
The reward better be something cosmetic that doesn't impact gameplay, like a cool outfit or mount.
If it's an item set, skill, or anything that remotely affects combat, then always assume that no matter how hard or rare something is to get, someone will have gotten it and will be using it.
I can't imagine losing the character that I've created in 2014 under any circumstances
It would be more like create a new charcter level it and gear the char up for the challange.
That should be a part of the journey for the reward and I think best for Eso players would be not to be able to enter the hardcore challange with characters they had for years, it would probably end up in a mess.