I'm surprised no one mentioned the XP debt which penalizes you for playing the game. Or did they get rid of that somewhere along the line? I played up until lvl 27 or so and quit largely because of this. The two steps forward, one step back approach just sucked.
What game does not have some sort of penalty system for death? As was already said below that CoH has increased XP and lowered debt amount (let alone now you don't get any till level 10).
Yes it slows you down but looking at some other games I know:
WoW - travel time back to your body, if you don't do that and want to rez in the graveyard then you get 20 mins of resurection sickness. Plus you have armor that you will have to spend money on to repair which is a grind if you are lower level.
Lineage 2 - When you die you loose 10% of your experience and I'm pretty sure a chance to drop weapons. This gets real nasty if you are having a bad day as you can de-level.
Overall ever MMO has some sort of penalty involved but some just handle it different (I didn't necessarily say better).