welcome to the hell
1. the game is based on Hellfire, and the latter never supported multiplayer game over battle.net
I'll try to implement this. If we get lucky the feature will turn out to be just restricted and not absent. If it's restricted I think I'll be able to remove the restriction. I hope so. By the way, Diablo Hellfire didn't even support multiplayer at all. It was meant for Single-Player only.
to make multiplayer features work you really need to download and study the guide on hamachi settings. check downloads section.
2. you never drop items or gold when you die. I have manually removed the code routine that used to handle item drop (still need to find and clear the code that does ressurection, btw). you probably get your armor BROKEN before you die? it's the only possible run of things that comes to my mind.