This is a great idea. We have something a little like this in our game as well, but it was less of a simulated situation and more of a present for the players; the characters all received cloth-doll action figures of themselves, with little wooden swords and shield, and painted clay heads, and tiny little strung bows. Very cute and fun.
Our witch is now on a personal mission to collect all of the figurines, and get revenge on the person who mis-colored her eyes on the doll.