I wouldn't be surprised if EverQuest's implementation of XP loss was inspired by the tabletop RPGs of its time, including Dungeons and Dragons, which caused a character to de-level if they were killed and later revived. In any event, I don't recall XP having any use in EQ except to advance your character level, so losing XP was nothing more than a penalty for failure; and, really, quite a mild one considering that EQ also caused you to drop all of your gear, if memory serves, and required you to loot your own corpse to get it back... or risk losing it to a later passerby.
Really, it's probably fair to say that EQ stumbled on the notion of penalizing a player's time investment in exchange for failure. Why people are so attached to the details of it implementation are beyond me. Time lost is time lost, and I think there's a better fit for FFXIV, and more generally in many modern MMOs.