In my experience, people tend to come up with other schemes. Some restore treasure XP. Others implement either bigger story awards or (what is often effectively the same thing) characters simply gaining levels by DM decree. A common problem is that story awards are not explicit before the fact the way treasures (at least potentially) are to players. Instead of being able to exercise strategies to minimize risk and maximize rewards, players end up just taking whatever the DM gives them.
I think this is one natural outgrowth of players getting to set their own goals. Not all players and their characters have the goal "fight monsters" — but at the same time, not all of them have the goal "accumulate wealth." Back in the day of 2nd edition, my experience was that you'd see more players developing goals that were very story-related: "kill my father," "reestablish the glory of my noble house," "find a place in the world," "win true love." Now, you could rationalize a desire to gain treasure as attaching on as a way to accomplish any of these goals, but it's still a bit grafted, and not everyone would do it.
This was (and still is) a popular mode of play, especially beyond D&D — it's just not particularly profitable for adventure publishers. If players have a lot of investment in one character and value the personal storyline over unrelated adventures, most often they're not terribly interested in running through pre-packaged adventures. I remember an old game in which we got to actually play through Ravenloft, to my mind king of the old-school modules — and fun though it was, the players generally saw it as a side trek to what their characters were really about, not a defining moment. Mostly they wanted the personalized adventure. This tended to mean the actual roleplay of achieving a goal was more important than the XP, but story awards were highly appreciated. They were a way for the DM to encourage that proactive define-your-own-goals play.
For games like this, a high lethality setting may encourage players to focus even further on their individual goals, making them much less patient with side-stories or adventures no matter how important they may be overall. Risking your neck to stop an evil cult is something players may resent if that cult has no narrative tie to their ambitions (other than the reactive "you can't achieve your goals if Monster Of The Week destroys your supporting cast!"). I tended to note a relaxed lethality level in games like this, because it wasn't really necessary to encourage focus. Other consequences for failure often had more emotional weight than lethality — screwing up and alienating a potential ally or loved one was something that could hurt, and in an ongoing fashion.
It's an interesting situation. Players can be just as interested in "keeping on track" as GMs. In such cases, I tend to say be robust with the story awards and easy on the lethality — but that's not exactly encouraging roleplay to flower, it's more working to keep it healthy after it's already bloomed.
