There have been many versions of this idea used extensively in the past. Depending on the AO terrain, objectives and dynamics, the key is to ensure a good balance of respawns and down time for each "shot" player. Otherwise if you have respawns that are too quick and or too many respawns then the game becomes stale rather quickly as the game dynamic no longer supports nor rewards the efforts of tactics and teamwork but rather supports an on going, never ending, shooting match. On the flipside if you don't allow for enough respawns and too long of down times for the dead players, the game may be won quicker than you may have anticipated. In short you need to give some respawns and or down times to simulate a larger force and reinforcing elements who are just arriving on scene. Unless that is, short and quick timed missions is your goal.
While using airsoft as a training tool, the Marines used a detailed rule like this during some of their training evolutions. I'd like to share what they utilized.
-Wounded/regen:
-Each person carries a red wound rag and a white (rag) to act as a field dressing.
-If a player is shot, he must lie in place with both rags out until a friendly player can reach him and apply “first aid”.
-Obviously, if a player is shot, he pulls out both rags- red to signify wounded, and white so a buddy wrap a field dressing on. Once the first aid is applied, the red rag can be put away, until shot a second time.
-A wounded player can be “dragged” into safety, then the other player can apply first aid.
-The other player must spend the time to tie a "bandage" around the wounded player's arm (all the while not getting shot himself).
-After tying on a “bandage”, the wounded player is respawned and can carry on as normal. Even though respawned, keep the bandage on until shot again (at which time follow the rule listed a few sentences below).
-If no one can reach the wounded player, he must lie there until he is bandaged by friendly players or until 5 full minutes have elapsed.
-At the end of 5 minutes of waiting, go to the Platoon Regen point, then you may reenter play.
-If a player is wearing a bandage and is shot a second time, then he must lie in place for a minimum of 5 minutes, then go to the Platoon Regen point.
Depending on the game dynamics you can also limit how many times a person can regen from the regen point.