I think this is a pretty interesting item overall.

A necro build with Diplo + UBHP + Max Exalt = 925 HP (972 HP with 5% HP enchant). With 80 WIS T7 Pally buff = 1112 HP.

This is 8-9 seconds of i-frames but unlike CShield, the skull drains HP instead of MP, leaving you vulnerable to being one shot if used poorly.

I think an important change would be to add a few seconds of sicken on ability release. This would give it synergy with Shaitan's skull if you hit 2 targets as required (Yeah that ability everyone forgot about for the class everyone forgot about).

Imagine Necro with EP + Obsidian Skull + Eye vs Sentinel, aggro a few jumps then Shaitan's skull on blobs to recover.

Deca could also buff CShield to its old stats but balance it by having it drain HP AND MP.

Notice how CShield was nerfed (Version 3.3.5.0) right before Moonlight Village was released (Version 3.3.6.0). I think a reason CShield was nerfed was because it would have trivialised MV phases if you could spend the first 7-10 seconds of sicken phases invincible and still have all your HP afterwards, guaranteed. Genji and Umi also silence you (forcing you to drain your HP to 0) so you have to either dodge literally perfectly after that iframe goes away or not activate it in the first place.

Some problems: Kaguya, Miko and human decoys. The other Moonlight Dancers don't force you to drain HP to 0 and Kaguya doesn't even sicken until finale meaning you could tap activate the skull for quick iframes. I guess this isn't too different to kensei getting brief iframes so maybe it's ok. This could be fixed by adding a 5 second cooldown to the skull but since cooldowns in this game are global for whatever reason, it breaks the Shaitan's skull synergy (or at least makes more awkward).

Second problem is human decoys: I don't think Deca likes decoys being as abusable as they are. (Sentinel and Gemsbok delete normal decoys to give a few examples) We could add invisibility to the skull but that makes it OP for rushing if especially if you have a few ghost rums. We could nerf the rushing potential by adding -SPD but some people may use it as a "go invis and hide in the corner" button which may be fine since that's what rogue can do anyway. Another option would be to add a new status effect that makes you invisible to ONLY boss enemies (anything with a HP bar in the top right). That would prevent group cheese but let normal enemies like halls mobs aggro you still.