Permanently lost items are items that have burnt, exploded, destroyed, despawned or fallen into the void. This would apply to any lost items, not just ones you've lost on death.

Another thing that could aid this is a universal rule in the end that makes items never despawn. This would solve the "where would items go if they despawned in the end?"

This ultimately means that you can never actually lose any items permanently as they would always find their way to the end.

Another thing you could do is have some amount of endermen hold some of the lost items or blocks too. You can kill them to recollect them.

Assuming Mojang has figured out how to properly implement code for moving blocks that isn't infested with bugs, I think the timing can't get any more perfect than bringing back our beloved floatater with the introduction of the sift.

The ichor is clearly not designed to just be a pretty thing that damages you; it's also a valuable resource for the illagers when it comes to contraptions and magics. With this in mind, I don't think it's too far-fetched to expect vanilla ichor to also bring some value to players who come visit the sift. This alone should be a nice enough reward for anyone who is brave enough to face ancient city!

Ichor Pool

Scattered around the sift are ichor pools. Ichor is similar to lava in its viscosity - it cannot be made to run infinitely when put in a 2x2. But fret not, some pools contain this special block under them called "ichor spring." Ichor spring block cannot be picked up even with silktouch. This is to encourage players to venture out and settle a station of some sort spread across the dimension.

Its only special property is to renew a source block of ichor on top of it when the tide (time of day) is at Thrive, where souls regenerate faster. Since the ichor liquid has some soul texture scrolling over it, I think this is only appropriate.

Ichor can be scooped up using a bucket and put into a brewing stand to fill empty bottles with distilled ichor. You cannot pick up ichor straight to the bottle because I think it doesn't make sense that something that burns inside and out can be put into a glass bottle. Plus, with this system, you're forced to actually prepare you resources for the to be mentioned floatater fuel mechanic. And that brings me to....

Floatater

Of course, it's not going to be actually called that. But as you probably already know, floatater is a joke block from the poisonous potato dimension snapshot that pushed any block that sticks to its front as if they're moving entity; drifting indefinitely until a block is blocking the way.

It is powered by redstone, but a bottle of distilled ichor still has to be inserted into it. There's no UI - you simply right click it when holding a bottle. It displays 3 dots on the left and right sides of the block, you can track your fuel this way.

A bottle of distilled ichor can fuel a floatater 1 dot each, which is a travel distance of roughly 200 blocks. That makes a fully charged floatater to drift up to 600 blocks. I don't know if this is balanced or not, feel free to discuss it in the comment section.

Infused Sculk / Sift Cobalt

The mineral used for this "floatater" is native to the sift. The reason why I'm calling the ore blocks "infused sculk," instead of simply "blank ore" is because I want to follow the "gilded blackstone" naming convention. It's also named that way to stay faithful with the "terrain being made out of flesh of a living creature" theory people have been discussing.

The mineral itself is called Sift Cobalt, similar to how the nether has its own specific quartz instead of just generic quartz. I can imagine sift cobalt having its own block set too, adding incentive to its addition. But for now, it's just here to make the "floatater" recipe feel exclusive.