Just read a Massively piece on death penalties in MMOs. It compares the different models used over the years (full corpse looting, ‘naked runs’ back to corpse, gear damage, res sickness, debuff and others).
I’ll admit I never played any of the hard-core older games enough to have experienced the harsher penalties. However for me the answer to this whole discussion is time. I play games to relax after a day’s work, sometimes with a few hours study inbetween.
I do want to play games that punished my slower reactions because I happen to be tired. I did try FFXI briefly around Christmas just gone, it was on super cheap on Steam. I’d just started exploring around the starter city and then the client crashed. I reconnected and was dead. This happened again, I immediately cancelled my account subscription – losing all progress especially if the client isn’t very stable just isn’t my idea of fun!
So it comes down to the fact that I value my free-time a lot more than the developers who try to impose harsh death penalties. Excessive grind of any kind is a big no-no for me. As one of the comments mentions, failure can be enough of an incentive for good play / giving your all. I personally don’t want to wipe repeatedly on a raid boss, not because I fear the death penalty, but because I’d rather progress and see something new!