In that case, if Rook was able to level back up to Lv. 8 he would still have only one life left because of the crumbling rune, right?
This is correct.
offtopic on hypothetical death-as-a-trigger ruleset
Similarly, you can’t do this:
L1 2/3 River attacks a L1 2/2 Zane with Tower
River kills Zane but takes 3 damage
River levels up twice from the kill, gets midband, heals, survives
This still works the same even if death is queued.
L1 River and L1 Zane+Tower fight, River gets 3 damage, Zane gets 2 damage. River’s deaths and Zane’s death go into queue.
You resolve Zane’s death first. River’s level up trigger fires, but you can’t resolve it before “River’s death” event that is already queued. So River dies anyway.