For me, the issue is that as a player I know when my PC's luck is going to run out and his/her skill fail; but as a character, how could I know that?
[MENTION=4937]Celebrim[/MENTION] gives one possible explanation - "I'm bleeding from a half dozen minor wounds, I've got blood leaking into my eyes, my muscles are burning, I'm light headed from blood loss, my knee is feeling about 85%, I know I'm going to lift my leather jerkin off tonight and find my torso a mass of purple wounds". For me this doesn't fully work, though, to bridge the gap between player and character knowledge, firstly because no other aspect of my character's performance is impeded (despite my knee being 85% I can still run and jump at full power, for instance), and secondly because in other situations I've been feeling pretty bad too yet triumphed.
Inevitably, there is for me a gap between the player knowledge of hp remaining and the PC's knowledge.
I suppose that at some level there always is a gap, because the PC can't know what h.p. are much less that they have 16 of their normal 45 hit points. But the PC can certainly know that they are 'the worse for wear', and in the end game world characters who are observant and knowledgable can note the PC's diminished status. You complain about the 'knee feeling 85%' should have a grosser impact on overall performance, but that particular term of art was chosen from NFL football where players will often play with various niggling injuries and describe their status as 80% or 85% and yet there isn't necessarily to the observer (that is, the person witnessing the narrative), any gross or obvious sign that they are performing below what they know to be their best. Indeed, it's not unreasonable to suggest that for someone hyped on adrenalin of competition that one of the biggest differences between being 85% and 100% is that the player is at greater risk of more serious injury. Probably it is true that some subtle wound track workign alongside hit points would be more realistic, but D&D has enough fiddly modifiers as it is and wound tracks tend to be very disruptive on play.
In point of fact though, I did introduce something like a wound track when I was trying to reform my rules. Characters reduced to 10% or less of their starting hit points are 'staggered', before they enter 'dying/bleeding'. I also adopted some GURPS like rules for staying conscious while dying. So there does tend to be a little less abrupt transition in the narrative from healthy to dying. But on the whole I consider it a minor point.
What isn't being addressed is the reverse. If hit points have no real relationship to bodily injury and other observable effects, then isn't perforce the gap between player knowledge and character knowledge to be complete? It won't merely be true that there is some gap between player knowledge and character knowledge, but there will be an absolute gap between reality as the player knows it and reality as it is possible for the character to know. So the consequences of me being wrong aren't less of what you complain about, but far greater of what you and Hussar complain about. After all, it may be true that the 100 h.p. character can't know that a 60' fall can't kill him, or that no single shot from a shotbow is threatening, but that hardly matters when speaking of PC's because it is the player that animates the PC and makes the decisions for them. If we say that because hit points are abstract and can't be known to the PC, the PC won't make decisions based on that knowledge, it doesn't mean anything because the PC never actually makes decisions 'on their own' but make decisions according to the player's will. Therefore for precisely the sort of reasons my position is being criticized, we must reduce as much as is reasonablethe gap between what the player knows and what the PC knows.
If hit point damage always represents some degree of injury and trauma from injury, however minor, then every loss of hit points communicates not just to the player's understanding but the character's understanding. The character knows and other characters can observe that he's looking and likely feeling less well. The player likewise will be motivated to behave in exactly the way that the character would be motivated to behave.
Hussar complains that the character shouldn't know that he can jump off of a 60' cliff without fear of death. But if the character really has 100 hit points, why in the world should this be true? A character with 100 hit points has no real world analog. A character with 100 hit points is an analog only of heroes of literature - the ones that jump from high places in necessity all the time and yet survive with only the thinnest of narrative justification. How many times can you recall in heroic stories where the hero must leap from a precipice to escape the villains, the bomb, the helicopter, the Pinkertons, ect. etc. etc. And how many times in all of those stories does the hero land with a splat and a crunch?
Now again, this particular area is one that I've decided could be handled better than it is and there are many different ways people have addressed this over the years. One way is that you make damage from falling cummulative so that a 60' fall does 21d6 damage and therefore must be taken far more seriously. The effect of this is to contrain the DM's narration of height so that falls are of less exagerrated distances. That's not a bad solution. Another solution, and the one I'm currently using, is the d20/d6 calculation which produces averages near the 3.5 damage per 10' of the standard rules but which occasionally produces massive spurts of damage - maximum damage from a 60' fall is 120 with 50 or more damage (and provoking massive trauma saves) being not unlikely. This creates a situation where normally PCs don't die to sudden falls (leaving the PCs master of the environment) but where jumping from a high place, even for a high level character, is like playing Russian roulette - sooner or later it will make you pay.
(On the metagaming discussion, I expect the players to play the game having regard to their knowledge of their hp remaining, even though the characters don't have the same knowledge. Conan doesn't know he's the protagonist, but I expect Conan's player to take up the game from a position of protagonism.)
Hit points don't protagonize characters. I dare say that mammoths have lots of hit points, but that doesn't make a mammoth a protagonist in my games. If hit points protagonized characters, then low level characters would be less protagonists than high level characters and protagonist status would be something you'd have to grow into after finishing your non-protagonist levels. I expect Conan's player to play Conan according to Conan's fierce passion and joy of savage living. I'm not sure I agree that Conan doesn't know he's the protagonist. I get the impression that Conan in a sense believes that life is all about himself. What else could it be about? You only get to see the story through your own eyes. Maybe Conan's joy of savagery is in a sense motivated through Conan's knowledge at some level of his own hitpoints. Certainly its motivated by knowledge of his own skillfulness with the blade and power of his limbs. The only thing Conan doesn't know is that he's only a character on a page written by an author, but I'm not sure we can say that he doesn't know he is the protagonist of his own story.