So lower health skewing the room & treasure chest contents is probably where this system is intended to match the theme. To be honest, the first time I looked at this game, I had no idea how it was relevant thematically. That said, it's a serviceable enough dungeon crawler, if rather light on content, even given the page and engine limits. I'm not a huge fan of rubber banding which is what this system functionally is, and practically, the party Warriors should be the only ones voluntarily taking hits or opening doors or chests, since their half health is only 2 points below where the Wizard starts, and is exactly at the Elf's maximum. It's also a bit odd that the Wizard is limited to close range attacks, and that both the Wizard and the Elf have superior defense to the Warrior, particularly given that the elf can attack at range, and gets more movement than the others, probably.
M is highlighted, but doesn't seem to be defined on any of the Explorers or Enemies, so I suppose that each square moved through costs an action? On that note, I'm not sure that the Room size and Character maneuvering adds enough to the game to justify the amount of (limited) space it occupies. With an unclear movement system, and literally only one ranged weapon, I don't know why the game has players bother to chart out a dungeon. If the end goal is simply to have a dungeon, then there should be more room variety, with the movement and ranged system abstracted. Take a look at The Micro Chapbook RPGs, Four Against Darkness, or D100 dungeon for an example of how this could be made to work.