In either case, the story can continue with new characters, raised characters, or the same characters in the aftermath of the catastrophic event. Whether or not the story was an exciting, memorable one and whether everyone had a good time creating it is what matters, according to the goals of play. That's how you "win."
You don't need to keep quoting the basic roleplaying tenets in the DMG. We all know them.
Perhaps I've done a poor job, but I've been trying try to spell out in so many words that for many groups, suboptimal choices are not fun. They expect to push themselves in every game, leaving little margin for error, and if they have to hold back or make suboptimal choices, the game isn't engaging or fun.
Players that want a hardcore experience aren't going to easily mesh with more casual players that are often making suboptimal choices for the sake of the story. This is a problem that needs to be managed up front by the DM, otherwise the DM will likely start killing off the suboptimal characters, or the hardcore players will get bored because they don't feel that they are being truly challenged.
That's why, IMO, it is not the players' job to manage the rules, expectations, and challenge level(s) of the game. If the DM knows his group, that sort of thing should already have been dealt with before the game even starts.