I have to admit I liked the exp loss during ffxi. I feel without it there is no real fear of being KO'd. I mean sure I would get mad if I was partying and due to someones obviously stupid choice the party would be wiped out but if the puller would link by accident and the tank or puller would sacrifice themselves to keep the rest of the party alive long enough to kill the first mob it was 'honorable'. But I just feel without any really penalty there is nothing big about being KO'd. Just my opinion.
There's a lot more to making players fear death than imposing harsh penalties.
Just compare single-player Final Fantasies to Dragon Quest games.
In the FFs, death has a huge penalty - Game Over. When you wipe, you reload your last save and try again. In Dragon Quest, on the other hand, you simply reappear at your last save point, with half your cash-on-hand gone. FF clearly has the harsher death penalty here. And yet, players are more afraid of death in the DQ games. Why?
Well, when is the player likeliest to wipe? When fighting bosses. In an FF game, you can generally count on there being a save point right before or close to a boss, so even if you get game over, it's only a minor setback.
In DQ on the other hand, save points are only in towns. If you die to a dungeon boss, you often have to work your way through the entire dungeon again, making death a fairly major setback.
Then, throw in the fact that in FFs, resurrection items are generally fairly common, cheap, and available early on, while in DQs they are rare, usually not available until late in the game, and often limited to one in your inventory at a time, and reliable resurrection magic also often isn't available until late in the game, and even single character deaths are bigger deals in DQ than in FF.
For similar reasons, death is more meaningful in WoW's endgame than in FFXI's. In FFXI, characters can be raised at basically any time, so if someone dies, they're really only out of the fight for the 5 minutes it takes for weakness to wear off (if that). In WoW on the other hand, raising the dead in combat is severely restricted, with an in-combat raise-equivalent available to only one class, a reraise-equivalent available to one other, and one class having a self-only reraise-equivalent, all on fairly long cooldowns, if someone dies in a fight, they're out of the fight until it's over unless they're important enough to use such limited resources to bring them back. (You also can't re-enter a raid instance while a boss fight is in progress.) And many fights have mechanics that make in-combat raises risky, impossible, or potentially useless. So each individual death has a greater effect on your overall chance of failure in WoW, even though the death penalty itself is less severe. Really, I would argue that's it's not even all that important to be afraid of death - not in a game. What's important is the fear of failure - after all, these characters are adventurers and ostensibly heroes-in-the-making. These are people who have bigger things to be afraid of than dying.
Death is just one way to fail, and in a group it's probably not even the most interesting...