Unless they player doesn't want to RP as a member of a dynasty, in which case problem created.
There's nothing wrong with individual players or player groups headcanoning this stuff if it makes it easier or more engaging to deal with character death. All I'm saying is that it's impossible to come up with an explanation that will please everyone, so why bother? Just leave "Game Over / Continue" as a game feature and move on. You're still not going to please everyone, but you won't have wasted any manhours trying. And you won't end up backing yourself into a corner with things like Holo-Me, and the mystical telepresence technology whose power ranges from the godlike to the impotent depending on how you're trying to use it.
Indeed. It annoys me a bit when FD try and explain gameplay with bizarre lore reasons that don't really fit with established lore anyway. I wish they would just say "use whatever headcannon you want" and be done with it.