PvP flagging should have 3 settings.  Flags should take longer to go into effect while in a combat zone, setting can be changed while dead and instantly apply when releasing.

1, Off; won't attack players that have not hit you first.  Killing this player lowers Karma and applies a criminal debuff.  If a player set to off is CCed and then dies to a Mob the death is treated as a PvP death and all players that hit said player will get penalized.  While set to off however, a player can only release to a storage node in the event of a PvP related death.  Dove Icon used to indicate flag set to off.

2, Passive; won't attack players set to Off or Passive.  While in passive flag a player will attack other players that are; set to aggressive, negative karma, or a criminal at a zero karma loss regardless of said players attacked first or not.  Killing this player does not cause Karma loss.  

3, Aggressive; Attacks everyone regardless of their flag setting, will not reduce the karma of other players.  Killing a player set to off locks grants Criminal Debuff.  The crossed swords indicates a flag is set to aggressive.

It takes 60 seconds to go from Passive to Off, lose the ability to attack Aggressive players first while changing from passive to off.  It takes 60 seconds to go from Aggressive to passive, lose the ability to attack first, but retains the ability to defend oneself, defending oneself against a non aggressive player resets the 60 second timer.  Going from off to passive is instantaneous.  It takes 10 seconds to go from passive to aggressive, but other players see you as aggressive instantly.

While set to off, if no monster over level 50 has been killed in the past 10 minutes, excluding world bosses, you are immune to PvP.

While set to Passive gain a 25% item drop rate buff.

While set to Agressive gain a 25% item drop rate and item drop amount (trash loot only) buff.

While in a party, the party leader sets the flag setting.  Leaving or getting kicked from a party sets all members of the party to be off to each other.  When the party leader changes the setting from off to passive or passive to aggressive you have to opt into the change within 30 seconds or when you use your next ability whichever comes last, failure to opt into the change removes you from the party.

Arsha you can only set to passive or Agressive grants a 25% item drop rate buff on top of the Passive and Agressive buff for a total of 50% item drop rate buff, meaning no change in item drop rate while on Arsha.  

Criminal system.

Criminal Debuff:  means that regardless of your flag setting you are freely attackable by anyone at any time, but you can not defend yourself unless you are set to aggressive against off and passive flags.  In order to decrease your timer you must be logged in on that character, not in jail, and be alive to have the timer to count down.  Similar to Negative Karma Guards will attack you, and you will not be safe in safe zones from player attacks durring the day.  Also durring the day you can not interact with NPCs in safe zones, meaning that you need to use NPCs in zones not labeled as a safe zone to resurrect your horse, use the storage, use the blacksmith or even interact with the church for church buffs.  Criminals need an icon to indicate the debuff, desert bandit debuff can be reused. 

Criminal Debuff timer is for 15 minutes on first kill and +5 minutes for any following kill, minimum of 15 minutes.  The timer of the Criminal debuff is infinite stacking.    

The Criminal system can be turned off in the desert or be used in place of the current bandit system.  Jail should remain unique to the desert imo.

Negative Karma still is a thing.  No changes to how Karma affects crystal breakage upon death in PvP or PvE.

Making these changes means that AFK and auto path players are protected from PKs due to being immune to PvP, Gatherers can still gather meat and blood without losing their PvP immunity, Barters and wagon traders will be immune to PvP.  This also means that yes a player can still Karma Bomb and even Criminal Bomb, but it will be curbed somewhat since you will have to return from a city to continue your grind.  This incentivizes players utilize passive and even aggressive flags while grinding without making them mandatory.  This also works to remove the CC ambush mechanic and Mob Feeding mechanics, where by a player runs into your rotation while you are grinding, said player is flagged up and CCs you while you can not defend yourself without penalty because their flagged status does not make them a valid target.

EDITED many times for spelling, and clarity.

Sorry but I don't PVP and am tired of getting ganked by players while I am fighting a group of mobs. You have a PVP server why don't you just make a few more and keep it on those. If someone kills me I should not have to flag to get them back it is rediculous as I don't want to PVP I just want to PVE.