Agreed, great ideas.
1. People should not lose EVERYTHING- Say all items, and half cash.
2. The best way to promote cyclic action is to make prices fluxuate as people die- When more people are dying, prices go up (and people continute dying and not being able to afford supplies), and as people stop dying, prices go down (people buy more weapons, and the killing starts). Have some lag, that will control the rate.
3. Have a central 'town' or have seperate towns, where different items are located, and make these locations the safe areas. But make them seperate, so that travel into war areas is necessary for supplies. No one location should have all necessary supplies, but all locations should have enough. Make the areas easy to defend and hard to capture.