Instant-death mechanics are not needed. There are already debuffs that decrease the healing potency (Infirmity or something like that). There is nothing stopping them from adding debuffs that prevent healing over time completely. Then there's also HP debuff. Something that this game already have, but for whatever reason doesn't seem to use. The more health the characters have in comparison to damage, the greater the ease with powerful healing. On the contrary, the less HP the less relevant the healing potency, since it will need to be used frequently anyway.
There is so much that can be done with relative ease to increase difficulty, that instant death mechanics are absolutely unnecessary, especially since no one ever said that "difficulty" means "ability to finish it". What is a problem with a boss that you can do without wipes without flawless precision, so long as you just pay that basic bit of attention, but have it take significantly longer instead? Saving considerable amount of time is perfectly fine in promoting and rewarding skill in comparison to doing it half-assed, especially if there would be rewards tied to duration of the battle that would give access to a larger pool of rewards (like minions or crafting materials) only if the fight took less than X time, giving just the basics otherwise.
Instant-death should be used mostly for high-stake battles. Stuff like Ultimate, some extreme trials, a boss here or there in a raid. Not just about everything outside of standard dungeons, and even some of the standard dungeon bosses.
As for blitzball, I do not understand the worry that Yoshida have. Players will play it once and be done with it?! Then what he plans? We have Fifa and similar sport games that are released EVERY SINGLE YEAR for YEARS now. And those games sell FAST when they are released. The same people buy them time and again and spend hundreds of hours on them. And they are exactly what a blitzball would be. A team-based ball game. Only the rules are different.
Just make sure the play is smooth, the rules are clear, the characters are reasonably balanced and that there is a ranking of sorts, and there may be people playing nothing but blitzball whenever they log into the game. Heck, if they put actual effort into it, there could be people that would buy Final Fantasy XIV ONLY for blitzball. Seriously, sport games are the very first kind of multiplayer games in human history. It is the exact thing that is PERFECT for an MMO. And he worries that it's not suitable?!