I also noticed a weird thing: destroy-able blocks were constantly re-appearing, as if something was constantly destroying them. Though there was nothing hitting them at those points. This only happened to the first row of destroy-able blocks, others blew up and respawned normally.

I'll go and try to re-create this a bit later.

And thats what I got:
http://www.youtube.com/watch?v=buEn7aSQT5M

At the start of the level I was busy with something. When I came to that spot, my mate was dead. I thought "how??? can someone die HERE... we didn't start yet!" and then I revived them and went forward. And dropped dead. At some point I started recording this, but the whole video is pretty short (didn't want to waste CE to study this bug to the fullest).

Notice that some blocks are exploding without receiving damage.

@Juances
There were no rockets at the moment of death. As for lag - its not as bad as it might seem, I'm pretty used to it and can tell when something's flying my way. As I said, there were no rockets at the moments of death.
Besides, as you see in the video, rocket explosions aren't THAT powerful. I got hit with my shield up, but shield didn't break, knight "became" dead out of the blue. When rocket hit me, there was damage, knight was blinking, stuff was flying around (stuff is flying around each time you're losing health). At the moments of "instant death" nothing is flying around, shield is ignored, status change is instant. I have seen more of this sort of bugs before, including monsters moving instantly while I am unable to shield/move/attack (I see myself shielding, can't move, receive damage, monsters are teleporting around instantly).