some comments on yours: you may wanna consider giving the players some undead-like traits from the pathfinder system's monster manual; elemental resistances (otherwise frigid mountaintops or volcanic caverns would be nigh-impossible to actually play in--extreme temperatures are no joke, seriously), bonuses against poison/disease/mental effects, bonuses to running for distances/holding their breath/etc.
they're the Chosen Undead, they should have at least a FEW advantages over the normal mortals, especially when they come with the high cost of creeping and unavoidable insanity. it also lets you play a bit rougher with them than a normal PC.
also, i'm liking your paid gestalt-like setup with souls, but the class stuff from those AND the playstyle bonuses would make for some darn powerful PCs, which might make your difficulty increases seem less dire.
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to posit some ideas of my own:
NOTE THAT THIS SORTA DEVOLVED INTO ME MUSING ON STUFF, SO NOT EVERYTHING NEED BE PAYED ATTENTION TO.
actually have players keep track of their gear's HP, and have things that affect them meaningfully (to promote taking greater care of their belongings, or using things more sparingly). they should be wary of wading into a boiling lake in full gear and wearing their pack, even if they aren't taking any HP damage--this isnt a silly argument either, i've had PCs ruin important mcguffins because they were dumb/careless, even after warnings.
for your players' sakes though, do away with the destroyed condition--the broken status should raise enough red flags to put them on the defensive, but you're not trying to actively punish them for having cool stuff that they likely died for (several times).
the above said, keep things tough but fair. have the death traps and environmental hazards, but give the players clues as to them being there, or ways to stand a chance against the huge killboss 4000 if they happen to do X in preparation of the fight (like sieth's crystal). if the players die in the attempt, consider leaving their progress there--maybe the boss is still hurt from the previous fight with them, maybe the levers/switches didnt reset, and so on. this is to give them a feeling of progress despite the setback.
there's systems for things like sanity in pathfinder as well--you could use them as a set for guidelines for hollowing (because hollowing isnt an all-or-nothing thing in the series, it's a gradual process beginning with memory). as the players die more often, maybe throw a complex their way, or a phobia of whatever killed them, or an unquenchable lust for rust monsters, i dunno. sudden lasting issues from dying like this could make them think more carefully about abusing their immortality.