First character death? Aurelius Ranneldi Glorio Ledondo Branneli or Rann. A 5th level Elven Bard with the Blade Kit from ADnD 2E. He was decapitated by a Grim Reaper.
How did you handle it? Todd, our DM made you work for every small thing you got, unless you were a player named Kurt. He felt that every victory had to be dearly earned. We'd been through a lot, well everyone but Kurt (he was a Thief with a Fighter's THAC0 and a lichslaying sword), so we were pretty deflated. The following week we woke up as bodiless heads and were tasked with escaping...it was a long night.