To try and explain my points a little further.
First and foremost, yes, I ignore the existence of raise dead spells for the sake of the discussion because if you allow standard raise dead then... well. To be as frank as possible, in that case, death is rendered even more pointless since its NOT a threat. Its a nuisance. You might as well just say the PCs are knocked unconscious/incapacitated, since the overall effect is the same.
If they are rare and exclusive things... then you are opening an entire 'nother can of worms that I don't feel like going into here right now.
So yeah, I am defaulting to assuming death as permanent (or at least very serious) as, otherwise, it isn't, you know, a real threat.
On the subject of the death flag... perhaps you misunderstand the idea, or perhaps I merely play it differently. Basically, for me at least, the death flag is a warning. In standard combats, there are threats of the PCs having important things to them damaged/messing up their plans/etc. But I'm not going to utterly thrash them and permanently ruin




of theirs.
Then, for major things, I sit back and I tell them that the upcoming stuff is serious/gloves are coming off/etc and let it be known that things can go very bad here.
In essence... it amounts to a general agreement that the players themselves know what they are getting into. They know there isn't going to be a sudden death trap in the next room, or that I'm going to roll a dragon on the random encounter table. They have a general understanding of the threat level at the time. Which I find fitting, since my games are somewhat "cinematic." TPK on mooks? Lame times.
On the subject of death breaking RP... this is actually something I'm going to very, very strenuously defend. The style of the game matters a lot, but what it amounts to is that constant transition of the game's "cast" is, in my experience, damaging in heavy RP games.
Yes, death can be cool and be used to great effect. It has been. There are epic examples and great stories to be told around the table about the time the Paladin sacrificed himself to save the party. At the same time though, its disruptive. It really is. You ever have an issue with some medium when a character died and the cast/story just suffered for it? The new guy just felt at odds with things?
Maybe its just bad luck in a series of new PCs that's colored me, but I've found that in long running games where you get an established character cast, losing one/replacing one/adding one in rapid succession (which can happen quite easily!) can really, really, really damage the integrity of the RP and throw it all out of whack, to the point where it really does become unenjoyable. Perhaps I'm unique in this experience.
Finally, despite my praise of the idea of the death flag (and my tendency as a DM to be very soft handed), that doesn't mean there isn't threat. *shrugs* There are other ways to punish PCs that don't involve killing them/ruining their character concepy completely. The issue is just balance.
^_^
Edit: And to adjust for some thoughts added above. I generally agree about the random encounters thing which is why they are used sparingly to not at all in my games.