Quite simply, this is an item in your inventory that will capture all the items in your inventory and keep them safe for you when you die (For the sake of a name, let's call them cocoons). Only you will be able to open this cocoon, however it will fade away and open for everyone after a set amount of time (5-10 minutes?). This will force people in SMP to either be patient and camp your "cocoon", or to walk away and let you have your stuff back. Additionally, it will stop items from being moved by a waterfall (IE: Into a lava pit). Once you open your "cocoon" it is destroyed and discarded, and all your items are ejected and you pick them up providing that there's room in your inventory.
Non-stackable (You will have to take up multiple spots in your inventory if you want to protect against multiple deaths)
Not too expensive (Possibly uses a bunch (6-7) of string?) Something that's common enough to make some cocoons every so often but not so common you can just carry 10 around at all times.
I see this as a way to prevent those who hate the idea pvp combat from getting frustrated with dying, as well as providing some protection from losing everything to a surprise attack from someone with a diamond sword, while also allowing those who truly want to steal (Insert name here)'s stuff to do so, and to encourage some epic battles over loot.
The name and the idea were taken from a text-based RPG called Hellmoo, they're not my own but I think it could really work for minecraft.