Although I can't remember exactly why, this was one of my favorite games back in the day. If i remember correctly, when you died, you didn't just die, you got relegated to some sort of dark world and had to work your way back into the world of the living or something along those lines.
I don't understand why they stopped making these as the last one (as far as I can tell) was made in the early 2000's. Such a great storyline, I can't believe that they didn't expound on this more.
Yes! They automatically moved you to another kind of spectral world where you could recover. It happened to me quite a lot when I died that I had to go back and it was a hassle although through the portal sometimes I could go back and it was less laborious.
Really when I played it I could not believe it was developed for PS1, I understand that in the early 2000s as you say they developed the later versions of Blood Omen (which I plan to play) which is the first and this one, but from there I think they did not release more, the closest was an MMO based on the world of Nosgoth but it had nothing to do, it would be great if they released a new version with the new graphics engines.