What's the significance of death in your setting?

Usually it's pretty serious, I don't think we have a cure for that yet.

Resurrection is prohibited because the gods are greedy.

Other than that it's pretty bland fantasy shit

You have to get in the bag

You also die in real life.

Depends on your place of living and cause of death. Some divine healers know Resurrection magic, but magic is limited in the world, and the healers are limited to the scope of the Church's opinion on the deceased party. Someone who dies of natural causes is dead. The gods took them, and you're not getting them back. Killed in battle, depends on the nature of the battle and sometimes the caliber of warrior. Can't resurrect every single level 1 Adventurer who thinks they can walk into a den of angry Owlbears and walk out without a problem.

Do they all eventually discover their paradise is basically just a simulation with no other people in it?
Are they supposed to just shrug and be happy for eternity alone, or is it really a test to see who has the willpower to escape?

Setting is mostly based on pagan ethos so...
There are four possible fates after death - for humans at least.
If you were a GREAT man, you go to the realm of the gods to feast with them eternally.
Note that GREAT is not the same as morally good. While a large degree of morality and honor is required indeed, it won't get you there on its own. You also need to be an achiever, a great ruler or hero or anything. Gods collect only the best of mortals.
If you weren't that, but also didn't commit many deadly crimes or didn't have "unfinished business" you go to the Underworld, where souls just... exist and don't do much else. They don't suffer, but not feel any joy as well. Just roam the netherworld as disembodied, lobotomized spirits. They can be summoned for divinations, but to gain the most full answers you'd have to venture to the underworld and ask them directly, which is not an easy task.
If the deceased was obsessed about something before their death, but didn't manage to finish it in life, often they are inflicted with "madness of the soul" which binds him to the material world, where they roam and haunt, as long as the matter binding them is not resolved, and then they can have peace. There is suffering in this fate, but it's mostly in form of frustration over the unresolved matter.
Simmilar fate is meant for those that wee truly evil and deadly disrespected the divine laws. Except they suffer far more in their roaming, and do not have "escape route". They may also gain some malicious powers over time.

Regular death is a very minor inconvenience. Even double death is something you can come back from. But if you die too many times then it can become a problem.

This is a comic story? If yes I would love to read.

Found it: dsss.be/hitler-vs-stalin/

Errant souls are found floating in the astral space between universes, before they dissolve into the ether.

Corpses are used for manual labour and spelljammer crews.

Most people go to be judged by the Goddess of death and from there are sent to their next life depending on how they lived their lives. Magic is really limited and almost nobody gets resurrected. The party has a cleric of life so they are somewhat happy, But after a couple of resurrections the goddess will come and collect her due.

Death is a conclusion. People who live well choose a final one with impact; others merely waste away...