I think there should be three types of rests:

  • "go to camp" -- available in the overworld and maybe other places where the path is obviously clear
  • "makeshift camp" -- wherever you are, with a chance to be interrupted thematically for the location
  • short rest -- as it is is fine for a video game, I think -- but should be allowed at least twice and maybe up to four times.


I like Gulpy's idea of allowing one "makeshift camp" per dungeon area, with a reset at the map checkpoints.

In general, I think this advice from the DMG can also adapt to a video game:

Quote
Assuming typical adventuring conditions and average luck, most adventuring parties can handle about six to eight medium or hard encounters in a day. If the adventure has more easy encounters, the adventurers can get through more. If it has more deadly encounters, they can handle fewer.


As it is right now, the game encourages you to take a long rest after every hard encounter. That's why I think short rests should be encouraged. This may be a little hard on the full casters, but the improved cantrips kind of make up for that. (I know this is heretical, but it might even be worth making Healing Word a cantrip.)