in my opinion, the extra life as prize will make the game kind of unbalanced.
just imagine new players trying to spar with all those people with an extra life, dont expect them to really know about this quest at they start and if they found out it may be hard for them to complete it (considering some old players are having trouble to get the scarf).
adding a health cap in spar would solve this tho, but i still think it represents a huge disadventage while PKing or taking towers.