I'd say that's exactly the complaint. Is this a known limitation in the rules, or a design feature?
It's not a design feature, so if the only other option is 'limitation in the rules' then I'd go with that one.
If you go back and read the first few years of Dragon, you'll see this issue coming up all the time. I might as well go and explain why.
In the early days of the game, falling was treated primarily as a trap because that's the context it primarily came up in. The problem was, there was no rules for traps. There weren't even rules for traps in the 1e DMG. No one seemed to think you needed rules, and so traps were ad hoc'd by different designers and DMs to all sorts of different standards. The same was true for falling. Early on, you'll find 10' and 30' falls even in published modules having all sorts of different mechanics. Gradually though, things started to get standardized around the idea of 1d6 damage per 10' of fall.
For low levels of play, this works pretty well and makes sense both from gamist and simulationist viewpoints. Although it may be hard to remember it now, a d6 of damage at one time was quite lethal to first level characters, and if more lethality was desired deeper pits could always be used. There was a casual realism to d6/10' damage through the first few levels of the game.
But falling is very different than getting hit by battleaxes in D&D in one very important point. Hit points in D&D are abstract, and so attacks in D&D are likewise abstract. When a character is hit for d8 damage from a battleaxe, we don't know what has happened until after we inspect the remaining hit points. That is to say, if the character has 40 hit points and takes d8 damage from a battle axe, we know that he took only a shallow superficial wound, whereas when a character with 4 hit points taking d8 damage we know that they took 'a battle axe to the face'. But falling doesn't work exactly like this because we know (more or less, and here is the source of the argument) ahead of time before we roll for damage what has happened. So in the case of the attack and the fall we are using the mechanics for different purposes. In the case of the attack we use the mechanics to find out what happened, but in the case of the fall we know what happened and we use the mechanics to simulate it.
I don't want to get into the various approaches that have been used to fix this except to say that they are very common and each address more strongly a different percieved shortcoming in the rules. All though make falling more lethal and all basically have in mind that a hero ought to usually survive a fall but should generally fear a fall nonetheless.
No sane person is going to charge enemies with a rocket launcher across an open field. D&D characters charge enemies with fireballs all the time, knowing that the damage is going to be inconsiderable.
Leaving aside that if you aren't in a vehicle, charging a hostile guy with a rocket launcher is probably a lot saner than standing still, I don't agree that the two situations are neatly comparable. And, more importantly, this statement indicates to me that you haven't really considered how fireballs are (potentially) different than falling. (Hint: A fireball is a kind of an attack.)
I wouldn't jump off a ten feet wall; should my character be equally terrified of doing so? If no, then how tall should the wall be?
I think terrified is the wrong word. I think you would jump off a ten foot wall if you had a good reason to do so. Likewise, heroes aren't terrified and don't balk at doing dangerous things when the time comes, but I think they should still respect a fall as something not to be desired. And, I think players should play the game that way regardless of what the rules are.
There are all sorts of complaints where DMs and players had different expectations; one of the repeated ones on the board is a bridge across lava. If you kill my character because I should have known that running across a bridge five feet above lava would be fatal, or kill my character because he stood and fought instead of run across a bridge that was obviously perfectly safe, I'm going to be annoyed, and rightfully so in my opinion.
Yes, but not necessarily for the reason you think. You are IMO looking at the problem wrong. You think that the failure is the DM failing to communicate the meta-information - how many dice of damage are dealt for being within 5' of lava. The problem isn't that at all. The problem is the DM failing to communicate the in game information. If running across a bridge 5' above lava is lethal because of the heat of the air, then long before I reach the point where I suffer lethal heat, I should first feel a blast of heat like that from an newly open oven, and after that a scorching heat that dries my skin and eyes and causes great pain and discomfort. Only after that should my hair and clothes (and body!) spontaneously combust. But in the case of the DM who has you die for charging across a bridge, you apparantly recieved no information between going from an area that was cool and an area that was lethally hot. That is the poor DMing, and not that the DM didn't tell you how many dice of damage you would take by going over the bridge.
In the real world, many people - having watched too much Hollywood - don't know that it is lethal to be within 5' of large body of glowing hot lava. So its reasonable that your characters dont' have the exact mechanical knowledge either. What is unreasonable is that they can't recieve in game knowledge. Whether you had Hollywood understanding of lava or not, you'd soon get a real understanding of it were you in the real world and near to it.
There's problems, both big and small. You want to make a monk that can fall/float down a wall safely. Is this going to be a useful ability in game? What about a kit that reduces damage to 1d4 per 10', max. 20d4? Is that close enough? Should your first-level ranger in D&D 3.x pick Dragons as a favored enemy? The fact that dragons are a rare enemy for a party of less than fifth level is not chargen knowledge, but a player who doesn't know that and picks dragons as a favored enemy at first level is going to be less happy then one who made a good choice.
All of these to me betray a mindset that is far to concerned with the metagame than the game. And all of these problems are addressed by having a DM who, when working with a new player, advises the player of the benefits and potential drawbacks of the character concept that they imagine using plain language, for example:
"It's cool that you want to be a Dragon Hunter. I think it sounds like a great concept. I do want to warn you though that Dragons are a relatively rare enemy, and so you might not necessarily get to use that bonus very often and it might be some time before you meet a dragon."
Or...
"It's cool that you want to be a Dragon Hunter. I think Dragons might be a common opponent in this campaign, and while you might not get a huge benefit out of 'favored enemy: dragon' immediately, in the long run you won't regret the choice."
Or whatever is appropriate to the game. What's really important isn't the mechanics, but that the character has a cool concept like 'Dragon Hunter' and that the DM, if he's willing to approve it, is also willing to work with it. For my part, it would just remind me as a DM to make a special effort to include draconic challenges/encounters in my plans.