Blah... It was a pretty weak penalty, really. I'll miss it. ****, I've probably died more times in FFXIV's beta than I did in my years on FFXI, simply because there's no real punishment now.
If you needed a whack to the head with the xp stick in order for you to feel you had an incentive not to suck, I feel for you. I actually felt a lot more enthusiastic about trying things like poking a Sphene Doblyn with my whacker stick or trying to take on one of the crabs in the area around LL with a 3-man rank 6-9 party. You try, you learn, and then if you're smart you don't do it again. I can see plenty of other little flicks on the ear for dying at an inopportune moment that SE could employ that doesn't involve taking away the progress that people have already earned.
Getting jumped by a cluster of Scout Vultures that didn't appear on my screen until I was standing in the middle of them and getting one-shot and sent back to the last aetheryte I visited only to try the trip again sucked a bit from the lost time perspective (running back) and from the cheap perspective (getting one-shot by something I couldn't even see until I was right on top of it). Those are little flicks on the ear that say, "Hey, we hope you learned something from all this." Tossing in xp loss on top of that is just the little punch to the face that says, "Hey, forget about how irate you are and go around telling everyone how much you enjoy this. Chicks dig it."