It should be definitely possible to live in such lands, but it will come with really harsh lifestyle if you do decide to live there. It would encourage late game team play, people could go on dangerous trips to the deepest point of this world, possibly even making camps on the way and camping. Or even dangerous solo trips if one feels so brave, high risk high reward bro... It would definitely give the game so much endgame content and possibilities to add way more endgame content on the base of this idea.
Underground of this world would apply the same rules.
Advantages for the hearthlings:
Better curiosities
Rare and really good foregables(gildings that you gild on armour or weapons, special curiosities)
Better animal qualities
Rare and strong animals to hunt
Hunted animals giving much more stuff
Better natural resources
Better localized resource qualities
Crafting quality buffs the deeper you are in these lands (???)
....????
Cons for the hearthling:
No porting to HF on KO(permadeath)
No porting to HF at all
All animals being stronger than in the normal world
No logout(Like being on outlaw all the time on these lands)
No village claims allowed(?)
No kingdom claims allowed(?)
MUCH higher pclaim upkeep
No roads allowed to be built or really fast road decay and high upkeep
Unconnected rivers and lakes, so people would be required to face the dangers instead of fast knarr trip through these lands...
All work that requires stamina should drain 2-3x more stamina than usual.
Faster decay
It would be definletly spooky to play on such lands and might require a new world, for the special biomes generation.
Little illustration:

To be updated....