Something important the game doesn't tell you is that permadeath mode also increases difficulty in ways other than just making death permanent, such as by spawning more and stronger enemies. Whether this really feels different, I don't know.
I wish permadeath and hard mode were two different toggles in the options, I don't know why that isn't the case already. I would like to practice against tougher enemies without having to start from scratch every time I mess up. Hard mode also seems to increase the diamond prices of fairy fountains (and Beedle shops?).
I agree that the way CoH does item-gating is weird. The main progression path has practically no item gating at all. But there are a number of speedrun skips (many clearly intended) that are item-gated. I question whether speedrun skips actually make the game more fun though. They skip playing through dungeons, but when a speedrun consists of overworld movement, dungeon clearing, and fighting bosses, reducing time spent dungeon clearing means you're spending more time on overworld movement, which is boring. The bosses are mostly pretty fun though, so maybe it's a wash.
I like your alternative vision where you just get base dagger and have to use resources to make stronger attacks. As is, it feels like you're being swamped with items yet have not much use for them.
I find another problem with the strong weapons and lack of item-gating is that it discourages any form of exploration. Having the right item at the right time rewards you with either other items, heart pieces, or rupees. Heart pieces are nice, but you will get enough health without chasing them down, especially if you go after bottles, which you can buy with rupees (plentiful) or a few diamonds. Items usefulness in combat are dwarfed by the advanced weapons, so you don't need them for that either, and you will get your choice of items from dungeons anyway, and a few fixed ones elsewhere.
Similarly, the reward for clearing an overworld screen are diamonds, being able to explore the screen in peace, and sometimes unlocking a chest. You only really want enough diamonds to infuse a weapon and/or buy a bottle. Red chests are rarely worth going out of your way; hover boots and glass weapons are nice, everything else is kinda just ok. Heart pieces are worth it if you aren't a Necrodancer god (I am not).
Sooo... if you are just aiming to finish the game, the optimal gameplay is to skip most overworld screens (do a few easy ones for diamonds or if there's a locked blue chest), and go straight for the dungeons. I guess at that point, it's just a reskinned Crypt of the Necrodancer, only with weaker items and more health. Which is a shame, because it could be more than that.
I am currently trying some dagger-only runs. I keep forgetting that I have items, so it's a work in progress :p
