This is a problem I've seen discussed for every 'long game' multiplayer I've ever taken an interest in (by which I mean, a game where death matters at all - so not like Battlefield/CoD).
In principle, everyone wants harsh death penalties - because they want death to mean something, so that pushes players into weighing up risks and trying not to die.
In practice - when people do die (particularly in a manner they feel is unjust), they don't find serving a death penalty to be 'fun' so they stop playing a game - and may never start again (after all, we play for fun right?). They don't want to deal with the 'downtime', they want to pick up and get straight back into the action.
Because developers want players, and players want fun, inevitably, they end up taking the sting out of death which in turn promotes a more reckless attitude to life in game; and thus people end up dying a lot more than they might have if they'd been taught to be more careful.
How do you solve a problem like that?