Yeah that is what I was thinking, I guess I am not the first one that got fooled hah. I am not too far into the game though so restarting won't be an issue, besides I want to try to beat the asylum demon on the first encounter.
I also picked it as my first gift, and wondered why my health didn't recover on its own. Nowadays there's not a lot to choose between with the gifts; Master Key remains popular for good reason (allowing early access to some higher-level areas, which if you can survive will allow access to good items and/or shortcuts), most of the others are situation-use consumables or have a specific (non-vital) purpose. Tiny Being's Ring is still sort of useful as there's not much in the way of good rings in the early game, but then choosing the Master Key can help with that too... sort of.
I was thinking of using the heal miracle outside of combat to heal up so I can actually have those estus flasks ready for clutch heals when I am about to die.
Same thing my recently-started cleric does; just make sure nothing takes advantage of your healing to finish you off. Most enemies will attack if they see you healing (quite sensibly), so you'll need to position yourself wisely and drink only when they're not able to attack (too far / blocked by terrain / locked into recovery or post-attack animations). Another nice thing about Estus - if you have enough HP and insufficiently upgraded flasks that it doesn't fully heal you, you can chain-drink multiple uses without a significant increase in consumption time (ie. your character already has the flask there, so just drinks twice instead of going through the whole animation again). Of course, it's generally a bad idea to get into that situation in the first place
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On another note, engaged in a little jolly co-operation today as I was feeling less antisocial than normal. Of note is just how fast the gargoyle health bars drop when three people are beating down on the same target. Quite pleased with my efforts up to that point too, as I managed to successfully retrieve my bloodstain - replete with ~20k souls and 4 humanity (not much in the grand scheme, but considering that my character is level 10 and not even at the Depths yet, it's pretty much his unlife savings) - from New Londo and netted a Jagged Ghost Blade too, which is what I went there for in the first place.