Here's my take on the subject.
In the mud I play, death is permanent, but also recoverable from. When you die, your corpse lays there rotting (providing no one butchers it) until rescued. Then someone can cast a spell to keep your corpse from rotting. You can be resurrected by a highly skilled healer, although you may have skill loss from laying there rotting so long. Or you can invest in an amulet, which means your soul goes into the amulet after death and it doesn't matter what happens to your body because you can get a new one if you want. However, very few healers are skilled enough to reincarnate you into a body.
I've yet to see a death system I like better than this, although granted I haven't played very many muds. And your chances of being revived from death depend a lot on how willing people are to pass on the required spells, as well as how many quests like to give out amulets and who may be hoarding them to drive up the prices.
The mud I play also has hunger/thirst, and you can die from not eating/drinking for a while. How fast you get hungry/thirsty depends on your stats, which largely depend on what race you are. Each mud day is 4 hours long, and you generally only have to eat once or twice in that time. You could survive on less food than that but being really hungry or thirsty slows down your learning of skills.
One way that we're NOT realistic is that you can craft anything instantly. However, I doubt I'd wanna sit around crafting very long if it took longer. So that's one place where realism has been sacrificed in order to make it fun.
Another bad-for-realism good-for-fun feature is wilderness travel. You can travel from one side of the world to the other within a few seconds if you're not too concerned about maybe passing yourself out on the way. I consider this much better for fun than another mud I've heard of where it can take RL hours or maybe even days to get from one town to another. By the time you get somewhere, anyone you may have wanted to talk to there has probably left.
I'm a great fan of not having global channels/tells. How we do it is that you can shout to communicate with anyone in the same town/area, but otherwise you can only talk to someone in the same room, unless you have spells available. We have a few spells which allow you to communicate mentally with people, one of which works over long distances if you're willing to wait for the spell to travel to them. And when someone dies, they can send an instant "deathtell" to anyone anywhere, but it lowers their skills considerably.
And in a perfect world, NPC's would do all the things PC's do, but as seen in another thread the problem with that is keeping players from abusing it.
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