James McMurray said:I'd let him do it, with a difficulty and DC based on what he hopes to accomplish. Whatever the results are, they need to be weaker than another class's At Will powers.
If he wants to apply a status effect to the enemy (like prone) then he'll need to hit with an attack and won't get to deal damage. Damage + Prone is the purview of powers.
If he wants to deal damage, then he's making a normal attack with a +1 higher ground bonus. If he's willing to take another d6 damage and can teleport higher, he'd also get the +1 from charging.
If he wants it to be a surprise maneuver and generate combat advantage, it needs to be combined with a Bluff check the round before (probably with a +2 bonus unless the enemy has some reason to suspect a death from above teleport). Alternatively, he could combine the teleportation with a stealth check.
I try to allow everything as long as it sounds plausible. The trick is in making sure it isn't too powerful. If he wants to do crazy stuff because he wants some grounds from which to argue huge bonuses, don't allow it. If he wants to do crazy stuff because it's cool, fit it into the framework of the game's existing rules as best as possible, and award XP bonuses instead of instakills.
This post is very helpful. Thank you!
I think most of my "you can't do that" reaction to the teleporting mid air stuff is that it just isn't anything you ever had to worry about a 1st level character doing in 3.X. Immediatly this seemed both an overpowered skill and contrary to the intent of fey step. The posts here have helped give me some practical ways to balance the ability and handle some of the situations that arise.
I too am a firm believer of allowing players to have fun with abilities as long as they do not break my game.