Death Penalties

It really depends if the game is targeted towards the casual crowd or more hard core players. In my personal experience, action RPGs tend towards the more casual players as it is easy to play for 30 minutes before having to rush off to work :) There are exceptions of course and that's what the nightmare/hell levels were suited for in D2.
Personally, I would not advocate a harsh death penalty as that may put off a large consumer base. Given the game's F2P model, people may be less willing to keep trying if they keep dying.
The ethical microtransactions model is a nice idea with the ability to apply aesthetic changes to your character. Perhaps they could extend that to the death model as well.
In other words, if you die frequently, your UI starts changing to reflect your weakened link to mortality. Your character model in game could also change subtly so you and others around you could see that you had been having a hard time! In that way, it might become a point of prestige against your fellow players by showing them how infrequently you die (or for those unusual players to show off how often they die!)

I don't like having a reward for staying alive. It's just not appealing. Death penalty for sure.

Loss of exp is okay. As long as it's not overdone by losing hours or days of progress per death.

An enemy group that kills the player could get HP restored (the weak become food for the strong!) This would make suicide tactics ineffective. My reasoning: If you continuously die during a boss fight, you're probably not strong enough. Go back and level up some more like other RPGs.

As for respawning, the point of respawn shouldn't be too far away, but certainly not at the exact location of death. I didn't like restarting from the beginning of the dungeon in TorchLight as it could be a long ways away.

A thought toward the checkpoints.. they could be linked to the warp system in town. You die and get sent back to town- go to the warp and teleport to the last checkpoint.

Though a little abstract my idea is a little different and has the possibility of making dying a little interesting. First when you die the following will happen.

1) You will lose an amount of currency that is "reasonable" and relative to your character level. Half of that lost currency will drop where you've died.

2) You will lose an amount of experience that is "reasonable" and relative to your character level.

After this is done you may spawn at a nearby town/checkpoint, but you are given two options. You can select to respawn in normal mode, which includes having all your items etc. in which you run back to pick up your body to receive half the gold that dropped and an amount of experience based on the amount of time it took to get back to your body (essentially a timer will start and every second passed is a certain % of experience lost on recovering your "tombstone/soul/whatever is left when you die".)

In the second mode "Revenge Mode" you respawn with total speed (or some other effect that increases the damage output of melee/casters/ranged) increased by a certain % as well as hit points/mana points etc. The catch however is that you do not receive any experience when recovering your tombstone/soul/whatever", but you still get the half gold that dropped. This effect too will have a limited time spawn which should be appropriate to create balance. To prevent abuse "Revenge Mode" should only be available so many times per hour that would be balanced e.g. Revenge Mode available after 30 minutes since last death.

My opinion is you either have serious penalties or you have none. Since the carebear gaming culture nowadays weeps unless there is none, I propose something like this:

Die once to a mob/player, no penalty.
Die a second time in the same place, same mob, or whatever, your avatar turns into a creature made of drinking straws, because man, you suck. All your abilities etc stay the same - only penalty is the avatar change. The more you die in the same place in a row, the more humiliating your avatar becomes and the longer it lasts.

From a RPG point of view i like the following idea:

You (or another player) hires "rescuers" to retrieve your corpse (for gold depending on how far away the corpse is).
It takes some time till you are actually found (so people have to actually wait a bit - trust me, people hate waiting).
You might even let other players/party members retrieve the "corpse" to the nearest "Healer".
Would be kinda fun if you could pick up your "dead" character with another char who got access to the area.

Then there might be a chance that your character is weakened because of "injuries" for a period of time.
-maybe walk slower
-can´t use a certain inventory slot (broken arm?)
-maybe slightly lower the damageoutput

Until the injuries are "cured" after a while. (maybe add a timer when the wounds will be cured.The effect could also end after the next level up.

why not add DEATH penalties to certain Crazy good items where if you are using the item when you die you take this hit "xp loss" if you are using this item which adds a much better boost you take a xp gold loss however if you are using this item that makes you "almost" a God or whatever and you die you Loose either an entire LVL or a skill LVL that would make people think is the risk worth the reward

you gotta ask yourself
Is the juice worth the squeez

If people want a death penalty then they can play Hardcore. That's the best death penalty you can have!

Well, I think we have many examples. Making POE different, it will not be easy but not impossible. I have some ideas:

Once a character dies, he reappears in the city in an inn, church, tavern, whatever. Let's say he was saved. But this has its price!

- Loss of xp (something that annoys the player, actually.)

- Temporary loss of attributes or characteristics, as is weakened (in minutes, hours / game)

- Price of rescue. Yes, this can come in many forms, since we are dealing here with punishment. It may be a random mission free - no prize, XP, gold, nothing. Just to pay for their miserable lives. This mission is not to be ridiculous or mizeravel - its difficulty should be in accordance with the character level. Something that the stress of the player, making him think he is wasting time, instead of staying with your group in the cave facing a powerful creature. And that mission is the soil and only he can do.

- Weakened stay near. While recovering (minutes to 1 hour) your access to maps or other regions will be limited and could only walk near the city. This is to let the player more stressed, no one asked him to die:)

Well, there are ideas. Regarding the length of punishment think it would be interesting to vary from 10 to 60 minutes according to your level. Leave the character in "refrigerator" retards its development intelligently.

The idea is for players to fear death! Die in these games is not laborious. I think death should be avoided, even in games!

Excuse my poor english = p

I like the idea a few people have posted about having an exp gain penalty for a short while after death (e.g. you only receive 50% exp for 10 mins after death).

If you do it this way, carebears don't feel like they've been "robbed" of their hard-earned exp. They can even just cool off/go make toasties if they can't be bothered playing at this reduced rate, but it doesn't force you to not play the game which just seems silly (e.g. as some "death timers" do).

Conversely it still penalizes competitive players significantly in that if you're trying to level quickly taking a hit like this will really slow you down. And the really hardcore players, well they play hardcore anyway =)

Of the ways I have seen corpse runs implemented, I think WoW has had the most reasonable model... although it does basically just boil down to a time-out while you run back. The problem with D2/EQ style runs (naked, corporeal) is that chances are you died in an area full of monsters, and chances are they are now all having a tea party around your corpse - possibly so closely/densely packed that you can't even get close enough to your corpse to get your gear back. In D2 you could just exit/rejoin but in that case why not just have an option to respawn in town with your gear, but close any TPs you have active. In short, I don't really think corpse runs are that great an idea.

I do really like another idea I've only seen maybe once or twice in online games (in fact I think it may have been in text based games only) similar to what blaze79 suggested - which is that each time you die your character becomes a little more disfigured... a scar here, a chunk missing there, crooked nose, missing fingers, etc... so people who have died a lot end up looking like a mangled wreck, whereas if you never die you still look pristine. Of course, the artists would probably try to kill me if this were implemented, which may be why I've only seen it in text based online games...

I rather not have a death penalty when unless it is a league or hardcore.
They are real annoying when you just want to play for fun. Plus they is really no reason to add them when playing normal.

Leagues are a different story.
Hardcore: Your character is dead, no chance of recovery anything and all your stuff drops for the other players to enjoy.
Ironman: Start with only half health
Attrition: The only one I see that an exp lost is called for. You lose about 5-10% of total exp.