yes, you remember how in chapter 1 when Algus died in battles (I know he did at least once) and never turned into a crystal or chest, just got the sparkle thingys, Mustadio does the same thing, even if he's dead at the end of the battle he'll be alright and he'll join your party quite soon (although once he joins you as a party member and not a guest he can die just like anyone else so remember that)