The loss of sp from death or deleveling is not a penalty its a nuisance. Seriously go try an "Old school" game where you lost every thing on death and then come back and look at sp loss and try to be scared or nervous about being ko'ed. Heck i started playing xi after quitting Eve Online, watching ten billion isk's worth of space ship turn into a pretty explosion when you lost a fight was harsh. Just loosing a bit of xp was welcome change.

There were things in xi that made me worry about being ko'ed or having a total party wipe. Loosing claim on a nm or wiping to a forced pop mob and waisting the effort that went into obtaining the pop item when the mob vanished. Loosing a timed fight, mission, or event due to being ko'ed to much and the clock running out because of recovery time. Loosing xp did not phase me in these cases. I was only annoyed that i had to go back out and regrind to get it back.