A PvP flagging system wouldn't work like that at all - basically there would be two ways to find people to attack: First the current way of blindly attacking anyone nearby with a relatively similar army strength (a system I think could be improved anyway), or Second having a list of player armies that are marked for PvP that players who WANT to fight difficult armies can avoid all the blind minesweeping the current system gives. You would have to be idiotic to flag a trade caravan or a training army for PvP in the proposed system - and if a player did, they'd learn not to do that. Likewise I think wanting to play an MMO and then not liking PvP is like playing an RTS and hating the birds-eye view of things.
There is some pleasant and profitable middle ground between permanent unit death and revivability. I think the basic suggestion of Crowns for Revive is sound for both players and developers. If a player loves permedeath, then they just won't use Crowns to revive units. But in order for PvP to be successful and fun at all as opposed to nerve-wracking and disheartening to at least one of the players every time, some sort of hope for dead units needs to exist.