I think that there are multiple ways in which mental health diagnosis can be a death sentence. I want to focus on a couple of different ways that overlap with what you've said, like a sort of Venn diagram, and heaven help you if you're stuck in the middle of it.
Something that first struck me many, many years ago was that how people are treated by mental health professionals and others, both in a clinical sense and in what I'll call a social or behavioural sense, is often governed by stereotypes.
So you are unwell. Someone thinks you may have Wotsit disorder. There's a bit of general waffle in the diagnostic manual they're using, then 8 criteria. They go through them and interpret your behaviour and what you say as meeting 5 of them. The textbook says that means you have Wotsit disorder.
Thereafter, almost everyone you encounter in mental health circles or umpteen other 'official' contexts such as physical health, social work, police, employment etc., will treat (in one or both senses) as having all 8 criteria. That may make you worse, not better.
Secondly, as is pretty evident to all of us here, there are more negative attitudes held and expressed towards people with some conditions rather than others. I was first diagnosed manic depressive in the early seventies, and mostly had little to do with the mental health services. But briefly, in the early years of this century, two psychiatrists thought I had, or might have BPD/EUPD. I wasn't treated well with a bipolar label, but the way I was treated when they swapped the diagnosis was utterly disgusting, absolutely revolting.
I had a long-term friend who, having been labelled BPD, was ground down by the way she was treated to the point at which she was barely functional, yet, in my opinion, most of her problems were down to the harm done by the way she was treated once the label had been stuck on her, which meant her actual needs weren't taken care of.
Thirdly, there seems to be a rigidity of how various problems, symptoms, behaviour etc. are treated that goes beyond 'official guidelines' etc. E.g. feel at the end of your tether and harm yourself in some way? Gosh, you must be engaging in manipulative behaviour designed to make people do what you want. It couldn't possibly be that you didn't actually expect to be alive long enough for them to have to consider helping you, could it? (Grrhh.) But if you did want help, why no sympathy for someone so desperate they'd hurt themselves to get help?
In short, I agree with you, and also feel labels and guidelines etc. have negative effects on our wellbeing and health care in multiple ways.