If you add a death penalty, people will be even less forgiving to people who make a mistake because they are new. This would cause an even bigger lockout to new people.

Also death penalty is just stupid, period. It doesn't make me scared to die, it'll just make me more angry.

You can't make these games scary. It's impossible. Things can only be scary by yourself. The Slenderman online version isn't scary because you have friends to laugh with while playing, vs the solo game which has you crying.