This statement, without the reference to player death, is 100% true for both styles of play.That whole experience is undermined completely if .... if you know that your DM will fudge the dice or pull a rabbit out of a hat to ensure that the players always win. When mistakes (or plain old terrible luck) have no consequences, then success is pretty empty.
However, just like a Skill Challenge, failure can mean many things, not just "character death": in the fatality-free game, failure still needs to be an option, and it needs to have painful consequences for the party -
- the NPC hostage they were attached to, dies
- the villain gets the McGuffin and his evil plot is now a step closer to completion
- the city is captured
- the PCs are captured
- - the PCs lose their magic items
- - the PCs lose their companions, pets, mounts, etc
- - the PCs lose their gold
Bad Things can still happen without equating to "character death" ... but if nothing bad can ever happen, then the characters' actions have no consequences, and boredom ensues.