In 4e, this issue of stakes-setting while climbing is handled in a slightly convoluted way: first, there is a somewhat process-sim "dice of damage per 10' fallen" rule (d10, rather than D&D's more traditional d6); second, there is GM advice on what height of precipice to use to achieve a given danger level for a given level of PC. Within this 4e context, it is reasonable for 1st level PCs to fight goblins on the edge of a 20' cliff - though the GM should be factoring this into his/her overall intentions around the deadliness of the encounter - but it is probably not reasonable for the PCs to fight goblins on the edge of a 200' cliff, where any fall will almost certainly be deadly for a 1st level PC.
In Burning Wheel, there are no general falling rules. The GM is given some advice (I can't remember whether it's in the core rules or the Adventure Burner) on what sorts of damage to stake as a consequence for various sorts of failed checks. In a recent session in my game, in which one of the PCs was trapped in a cave behind a deadfall and wriggled out through a small gap being led by his pet snakes, I imposed a Midi wound as the consequence for a failed check (described as the PC not being able to glide down slopes as easily as his snakes, and slipping and falling and bumping his head). A Midi wound imposes a 2D penalty - perhaps analogous to -5 or a bit more in 4e - and generally takes a month or two of rest to heal.
In general, judging a reasonable consequence requires skill as a GM. (As I and other posters have been noting for much of this thread.) @
Maxperson has expressed a concern that:
narrative context might make it interesting for you and 2 players, but not for the other 3 players at the table. A different narrative context might make it interested for one of those first 2 players, 2 of the second three, but not everyone else.
Personally I don't tend to find this to be an issue - most of the time, most of the table is pretty interested in what is going on even if not all the PCs are involved; and if all the PCs are involved then the consequence that is narrated can be one that engages all the players via their PCs (eg the discovery of the black arrows).
Maxperson, is there some particular instance of this that you have in mind? Do you think there are many players who would not be curious about what happens when the jailer turns up to taunt (and perhaps free, if things work out right) the PC trapped in a pit?