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A while ago on a MUD I used to play (I won't name names), one of the implementors ran a storyline in which an undefeatable, invincible monster was attacking the game's main city (which was also the recall point for the majority of newbies.) Anyone who entered the city was immediately attacked and most likely killed by this nameless monster, and the administrator stated that the only way the players could avoid it was not to enter the city. Groups of over ten people would attack the monster, and they'd all be struck down and sometimes slayed outright using wiz commands.
Then, the administrator got bored and simply left the monster sitting at the recall point until finally a more compassionate lower admin transferred it away (and SHE was very nearly denied for doing so.) After that, the game progressed as usual, except that most people had died at least once.
The whole thing was very poorly done, had no point from a storywise aspect, and seemed simply to be an administrator having fun at his players' expense. There were no lasting consequences and no explination was ever given. This probably is why I greatly dislike throwing unwinnable situations at your playerbase - in my opinion it's just going to upset people needlessly and for no reason. Players don't like to feel like they have no options, they want to feel at least somewhat in control, not just pawns to be pushed around.
Then again, the situation I described was very poorly done, with no storyline backing, and no overarching plot (even though the game is supposedly "RP intensive"). I'd be curious to see if no-win situations have ever been done in a more mature and thought-out way, and what the reaction of the player base was.
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