Ouch, tough that you had to deal with a Daemon Prince. But it's correct that the Daemon Prince arrives with full amount of wounds, no wounds taken earlier are transferred.
You could have accepted the challenge the first time, I think. That way you at least had at least one reroll for your Character, should he survive.
It was very interesting to read as the layout was very nice and clear. I hope you'll post some more, next time with more points