I honestly disagree. I don't think harsher penalties make success any more rewarding, unless you honestly don't care about succeeding and only care about avoiding peril. Imo success is success, the only thing that determines how great that success feels is the challenge. Greatest example is, say a really difficult crossword puzzle. OR maybe a ridiculously hard game of sudoku. Or maybe being able to spin a basketball on your finger. Heck, how about making it into the NBA? None of those things have a harsh penalty for failure (unless you were a dropout). Despite this, success still feels overwhelmingly good. Of course if you're an adrenaline junkie, you need high risks. Though any real adrenaline junkie wouldnt be playing MMO's to get his fix (though some do and claim hardcore status..makes me lol).
I agree with needing challenge, but challenge can't come until the mechanics of the game are finished. I also think only some things should be particularly challenging, others moderately challenging, and the rest relatively easy or mildly difficult. Not everyone can play an MMO 6-7 hours a day. In fact, the ppl most able to pay for the game are the ones with the least amount of time: college students and working adults. Of course kids can play too with parental financial support, but imo final fantasy built its fanbase on the kids that are now college students or adults in the workforce.
An isolated time sink is not bad...for example, achievements are great. But an entire game should NOT be a time sink, that is just terrible. Again, it isolates the ppl most able to pay for the game. Imo time sinks are a cheap way to add value to something that doesn't have value. Ppl should invest a lot of time into a game because it's fun, rewarding, or challenging. That's just the bottom line. Making anything take a ridiculous amount of time due to poor rng, ridiculously low drop rates, or crazy xp requirements is just cheap. It says "this isn't actually worth your time, so we're going to force you to put more time into it." Lazy lazy lazy. But again, I say, some time sinks are good. I just don't feel the entire game shoudl be one huge time sink. That is just a waste of time.