First, movement. I mentioned the problem of diagonals and my partial solution of a grid with octagons overlaid. I found an easy way to handle diagonal movement. It is only allowed within an octagon, not between them. This perfectly fits the movement I wanted and is an easy way to express and understand it.
As for the deadly nature of the game, I decided that one-blow character death would be no fun. I've devised the following mechanic- on any attack, the defender can choose to make one of the wounds "superficial". It lasts through the battle but not beyond. To do this in game terms the player must discard a defense card face down so it is removed from play for the battle. I like this because it imposes a penalty, gives the player more options, and will often avoid the one attack player kill.
I feel like battles took too long, so I'm lowering the base to hit target from 14 to 10. I also devised a point system for character creation. It will take some tweaking, but it's a start.
I have a "play date" set up for Sunday, and perhaps we'll get to TBD. It'd be the first test with another person, and we'll have to see if it's any fun!