EDIT: Found it, it was not within line of sight, but just on the floor on the other side of the office trash can =Z.
You are correct, Brett. "There will be one Death Stone for each time you have died
beyond the two free resurrections." You then add white "Life" stones until there are 10 stones total in the bag. So your 3rd death has a 10% chance of being permanent. As an aside, when this happens you need to return to where you died and leave a note saying "You find <name's> permanently dead body here." so someone has to get you if they want to perform burial rites.
According to the book, this is done "When you show up to the Greater Earth Circle to resurrect.", so it seems to be *before* to 10 minute waiting period (I remember someone having that discussion with Frederick last weekend and not being certain.) Page 94 if anyone wants to re-read the section for themselves.
Last thing I'd like to mention is you can spend goblin points to 'buy off' the 3rd death, but each time you die there will always be at least a 10% chance, because you can't buy off your 'free' ones.
Garnett said:
>_> I was never a fan of the coin toss in Underworld, if there is a place to debate what might be changed in the death mechanics I want inz!
Rule change discussions go in Rules Theory on these boards.
(What I had written
before I found my book

From my recollection, it's three black and 7 white. I'll double-check though, as soon as I can find where I put my book after I unpacked it. I believe it says something along the lines of one black stone per death and then add white stones until you have a total of 10.
So, no, they aren't 'free' deaths, you just can't permadeath on the first two, and then have a 30% chance of permadeath that increases each time.