I agree with pretty much everything that has been said. When it comes to RPG's, there really is no right or wrong way of doing things. It's about enjoying what you're doing.
That being said, I've been into this hobby since way back when and seen a few different approaches to this subject in my time. IMO, as a player, I find it incredibly frustrating when confronted with a killer GM. But no-where near as frustrating as when my character is given a reign of immortality. Worse still, for me, is when placed into a no win situation only to have a bunch of hard-core NPC's turn up and save you...
As GM, I have tried to find a balance between these extremes. I find that I like to let my player's flourish in their build-up encounters but, generally, take no prisoners when it comes to the big boss.
But that also works both ways. I'm not the sort of GM that fudges the boss-man's escape as I think this would just frustrate players.
I also seem to allow the flaunting of luck/fate/destiny points or whatever game equivalent in order to create entertainment within the story.