The best games I ever play in are character and DM driven, not mechanic driven.
I don't really follow the contrast. The best games I've played in or GMed are driven by the players - and especially the way the players use their PCs, including but not limited to character build and action resolution mechanics - and by the GM and the way the GM runs the gameworld - including but not limited to encounter design mechanics.
Players and DMs, not levels, should approximate the challenges and risks of the players' actions.
I don't agree with this. I spent 20 years GMing Rolemaster. RM has a fabulous character build system, workeable action resolution mechanics (which, with a bit of tweaking, are more-than-workeable for melee combat), and no level/difficulty based encounter/challenge design mechanics. This last feature is what eventually drove me to D&D 4e - like RM, it has fun character build mechanics (not as intricate, but still very flavourful), fun and tactically engaging combat (moreso for me than any prior edition of D&D) and it also solves the 15 minute workday problem for my group (whereas high level Rolemaster suffers terribly from this). And unlike RM it has the tools that help me do my job as GM - namely, to gauge challenges and to easily build encounters that work (in terms of delivering an enjoyable game experience) better than many of the RM encounters that I have build and run.
Walking to your mailbox should not be just as challenging as traveling to mount doom.
And it's not. But I don't run a game in which walking to the mailbox comes up very often.
Real estate issues haven't really come up yet in my D&D game, but in the Rolemaster games the challenges to party's houses and estates tended to be ones that were (as best I could judge) appropriate and interesting for characters of their level and ability. For example, I didn't initiate the plot involving babies in the players' hometown being born without souls (from the 3E module Bastion of Broken Souls) until the PCs were around 20th level, and hence capable of meaningfully engaging in a quest that would require them to interact with lords of karma, break into the prison planes of banished gods, enter the lingering dreamworlds of now-dead gods (and resurrect those gods), etc. Nor was the party's military base attacked by Kraken Drakes until the PCs were powerful enough to have a show at defending it from that attack.
I don't think my practice in this regard deviates very far from the norm for a lot of GMs. It is an approach that 4e is clearly well-suited to. Hence my preference for that system.
I think using mechanics as the basis for an encounter, challenge, or conflict is a mistake- likewise, using them as the sole determiner of success is a mistake- it undermines the entire reason for playing a roleplaying game or DMing one.
I'm curious - do you apply this approach to combat challenges?
It decreases player investment in the actions of his character, and it decreases the creative control of the DM.
In my own experience, the more mechanically structured the mechanics for resolving non-combat challenges, the more that players will build PCs that are well-suited to such challenges and have those PCs attempt such challenges. In my personal experience, this increases player investment - it doesn't reduce it. Others might have different experience. I know I'm not the only one, however, as there is a sizeable body of RPGers who (like me) find that games taking more "modern" approaches (eg The Dying Earth, HeroQuest or more indie games like My Life With Master) increase more dramatic and invested play.
What I like about 4e is that it combines this sort of modern sensibility with elements of the more traditional RPG (such as the intricate character building and the tactically challenging combat) which tend to be missing from some of those other games.
It supports thinking inside the box (the game) when RPGing should be about thinking outside of and beyond it (real life).
Again, I can only speak for my own experience, but this isn't what I have found to be the case. To give just one example, from my session on Sunday:
Thunderspire Labyrinth (D&D 4e module H2) has one section which is a fortress of goblinoid slave traders. Also present in the fortress are two duergar slave traders, whose comrades have purchased slaves and are taking them to their duergar fortress, but who are themselves still hanging around with the goblins. The module doesn't tell us why they are still there, but I decided that there was a type of ransom agreement, whereby the two duergar would leave the goblins only when the slaves had been taken safely to the duergar, and when the goblins' wizard leader (Golthar from The Night Below, D&D Basic module B11) had heard that the money paid for the slaves had been successfully banked and wasn't fools gold or anything similar.
The module, as written, clearly expects the players to fight the duergar. My players instead killed most of the goblins and hobgoblins first before they even found the duergar, and a parley ensued (initiated by the duergar, but bought into by the PCs who wanted to take a short rest). Using the traditional approach I (as GM) would have to set DCs for influencing the duergar, decide how many successful rolls are needed, decide whether to determine probabilities by requiring one big roll or allowing a number of more modest rolls, etc. Using the skill challenge mechanics, I only had to set a difficulty and complexity (I used the level and number of the duergar, to keep the XP balance of the adventure unchanged) and then allow the challenge to play out. Sweet-talking happened, bluffing happened, intimidation was attempted but led to the negotiations nearly collapsing (a failed skill check), more diplomacy recovered the situation (using the DMG2 rules for negating a failure) and in the end money was exchanged and a contract drafted and agreed to by both parties - money to be left by the PCs in a neutral city in exchange for return of the slaves by the duergar.
My past experience tells me that the same result might have been possible using the traditional approach with my group. I think it is less likely that it would have done so. This is because the mechanical dynamics of the skill challenge system virtually guarantee that there will be twists and turns as the negotiations unfold, taking the story into places that no one (player or GM) foresaw when the thing started off. (This is why I don't feel the force of the "thinking inside the box" or "killing creativity" criticism.)
Also, the skill challenge mechanics have other features that I like - such as a failed intimdate skill check not having to be construed as "the duergar aren't frightened" (an implausible state of affairs when they face 5 people who have laid waste to a whole fortress full of soldiers) but rather can be construed as "your frightening of the duergar doesn't further the negotiations, but rather threatens to derail the whole process". This is because a skill challenge is very clearly not just about "how many checks did we succeed on" but "what have we achieved in the gameworld by succeeding at those checks" - and hence a failed skill check doesn't mean "you're not intimidating" but rather that "your intimidation is not contributing to the result you are hoping for from this skill challenge". D&D has always had this sort of approach to combat, or at least melee combat - where a miss doesn't have to mean "I suck, I can't even hit the broadside of a barn" but rather can mean "I'm a pretty good fencer, but his parrying is even better!" - but until 4e hasn't really supported it when it comes to the resolution of non-combat challenges.
Don't get me wrong, I like having mechanical support for player action or an interactive environment. But I just think you are putting the cart before the horse.
I don't know what the metaphorical cart and horse are meant to be. What I like are mechanical systems that support the construction and resolution of the challenges that are the gist of the game while putting minimal burden on the GM to have to exercise discretion with the hope that the game will turn out to be fun. In this post, as well as others in the thread, I've tried to explain why.