The idea sounds like an interesting concept to implement, but it'd definitely need to be different from what you're suggesting since my interpretation of what you've written is turning our current grind into a harder and longer grind session with no real reward to show for it or to even make it worth doing. Stat's are capped at 100 base and weapon affinity is capped at 3k (4k in japan) so in order to make this work at the very least rebirthing would have to allow for stat/affinity cap raises to a higher tier.
To implement a rebirth, well, fundamentally it's a bit awkward especially if you plan to send the person back in time in the story's progress.
I suppose if it had to be done it'd be something like fighting an embodiment of negativity (born from negative human fears/emotions and potentially within yourself) and absorbing it/defeating it which causes a rift in the timespace of temporal rift which sends you to a identical parallel universe in which you start off possessing greater potential and souvenirs from the alternate dimension (which is apparently now potentially doomed since you are in this new identical parallel universe and there may not be a "you" replacement as a result :3).