It sounds pretty cool, but I can imagine alot of quitting. I mean what would happen if someone on your team just kept killing their teammates for the heck of it, I've come across players like those before who just like to troll.
This is the only problem I could see with it,, but it's a pretty big one. With the RPG lab, you could at least kick teammates. Since you can't kick players would team kill you while cursed, they could do it as much as they wanted.
ND..make this a lab after you turn Mercenary mode into a permanent thing. It would be the funnest thing in the history of U3's MP. People just running around as skeletons hitting and shooting anybody and everybody... XD