I agree that permadeath is not wise to implement. You can, however, change Game Settings -- I use ExecuteConsoleCommand("setgs gamesettingname ##",0); (syntax is paraphrased from memory, so might wanna look it up).
It's true, custom forms are not usable in Script Dragon due to load order messing with Form IDs. Best case scenario, you could retrofit a rarely-used Magic Effect to your purposes and apply that.
You're welcome to make your own hotkey script (especially if you can make a better one, I'd gladly use it). And that is a good idea, I'll look into adding it. Unfortunately since I can't detect when the player equips something I might have to resort to making automatic checks every X seconds (so it might be a tad unreliable).
I'll look into the bug too when I get a chance, odds are the delay between equipping items is too long.