I honestly enjoyed the XP loss in FFXI, as crazy as that sounds. It gave you a real sense of danger while you traveled around and gave a nice sense of accomplishment when you could successfully pull something off. Like as a RDM, I would attempt all sorts of things while soloing or with a duo partner. It just wouldn't have been the same without a death penalty. Now it's kind of like "Hey, lets try this and if we fail it doesn't matter".
FFXIV definitely needs some kind of death penalty to give encounters the same feel as FFXI. Perhaps it doesn't have to be XP loss since many are against it, but I feel we need something.
I can see your point, but I don't think anyone goes in to a party, or leve or whatever, saying "Let's try to be as inefficient as possible!" People don't want to die, because it is a timesink in itself.
In FFXI you already died, already had to respawn back at your HP, tele to a crystal, rent a chocobo, or worse walk back to camp. This was, at least, already 10-15min of your time AND usually people would leave groups after a wipe so you'd have to find other members. Then on top of that, the EXP loss, depending on the PT it could take you 15min to 30min just to get that back.
Ironically, I COULD see an EXP death penalty in FFXIV, but only because of the ease of Teleporation, and ability to solo your EXP back. But as I stated I think the system is fine as it is.