A slight alteration to one of my mods can put this into the game fairly easily. One could have the champions have permanent death as well. One major issue for this would be that the AI is not designed around this element of don't die ever. There are some calculated risks it takes and sometimes those risks don't pay off... so basically you might see your game end in 30-40 turns. But if the AI was programmed with this in mind, and if I was clever enough to ensure that the AI players never die in battle, then we could do something about it.

No... it is defined in the race configs. By the way I think I might have solved your spawning multiple monster lair problem ; )... more testing, but I think I can do it.

I love this as an option, but the AI sovs should get some kind of buff - I can see them accidentally sending their sovs into a bad situation. The Ai may not be ready for this win condition, it is used to its sovs being invincible.  

On Expert and higher, the AI could just hide their sov away in the toughest fortress with a full army - that'd prevent killing them too easily. On lower difficulties, though, if it turtles its sov it won't expand quickly enough, and could paint itself into a corner. 

So the AI really is the only issue: can the current AI handle the risk/reward dynamic?