I would argue that games need “stakes” for investment, and a game that doesn’t have a way to keep tension and suspense is at risk for stagnation.
However, character death and the risk thereof is only one kind of stake. One that will appeal to a specific subset of the gaming population but not everyone. More, I suspect it’s a stake that has fallen out of style for a reason. What was appealing when the playerbase was largely teen and twenties students who could be on a lot, at weird hours, and whip up three characters like they were nothing may not have the same appeal to 40+ players who are trying to fit in a couple of hours for a scene a couple of times a week between a full time job, full time family, and other friends and hobbies. For a lot more of us, “I could die at any moment” is just less of an enticement at this stage. Maybe because we’re starting to worry about that in our real life!
But I definitely recommend that anyone who thinks there still IS an audience for the hardcore PvP-style of MU* go ahead and make one! More games are good, and having choice helps keep people engaged. Going back to the idea of the three-month player, I think having a wide variety of games in different genres (and subgenres) helps keep the overwhelming surge of people desperate for SOME game down a bit.