After some research and homework, I think I'm going with these settings to start out. Auto allocation is turned off as well.
Open for feedback!
If you're coming to grips with the game I'd play on Easy/Warrior difficulty. Playing on Very Easy really just trivializes the game to a point where you aren't even learning anything; in-fact it probably creates bad expectations since you can easily F1+F3 pretty much any situation.
While I understand the temptation to lower player damage (especially when you get hit by a surprise projectile) anything less than 50% is silly. You might as well be invulnerable at 25% really. You're not meant to be a super hero in this game, you're just another person.
That said I would not hold it against someone for disabling Clan Member death since it can be difficult to get new companions with certain skills, and Hero death in general is way too random. It should be more conditional, like taking a lot of damage, or headshots only. Though the chance is pretty low by default these days.
Ultimately Bannerlord should be played on Bannerlord difficulty; in Ironman mode. That's how this sort of game is meant to be played, because other than death there really is no "game-over" scenario. Lost your 250 man elite party? Deal with it. Lost your fief? Deal with it. Couldn't get your waifu/husbando of choice? Deal with it OR just pay their Dad a lot of money, medieval style.
However Bannerlord is still too much of work-in-progress and or buggy for me to honestly recommend turning on Ironman mode. Best thing to do is try and practice self-discipline about "save-scumming".
Like Yoshioki said you'll appreciate the game as a whole more when you really embrace the occasional failure. Saving the game all the time so you never lose is it's own kind of cheese. But all that said even I wouldn't play Ironman style all the time, cause sometimes you just want to have a more Alexander the Great kind of campaign.