Hero death and disposition of Upgrades and Experience

[StayPuft]

It has been a while since I consulted the rule book, so I can't say this officially...

However, I think it is safe to assume that it all gets discarded. The upgrades, as well as the experience points, go with the hero who earned them, not the player themselves. For example, the upgrade you earn goes to a specific hero. It doesn't just go to your whole hero team. Also, if I remember correctly (it has been a little while since my group and I have played this) I believe the experience points, like-wise, go to the specific hero who earned them and not to some general pool for the player.

So, I can't say for 100% sure (perhaps one of the other members can chime in with a direct cite from Flying Frog themselves), but I do believe you played it correctly.