The permadeath thread got me thinking about other ways to provide meaningful consequences for death besides simply ending the game.
One of the game ideas I have (who knows if I'll ever end up making it) is a roguelike where your only method of character improvement (aside from equipment upgrades) is mutation. Mutations to make you stronger, let you shoot lasers out your eyes, grow extra arms to hold extra weapons, etc.
When you die, you would come back to life at a nearby cloning facility, but the technology is imperfect, so when you come back you'd end up with a bad mutation. The bad mutations could possibly be cured, or maybe the game could eventually end if your bad mutations just get so out of hand you're nothing but a blob or something, but I think it'd be more interesting than just simple "You die, game over."
I've seen some games where when you die, you go to some kind of underworld and have to get back out, either by fighting your way out, or solving puzzles, or whatever.
What are some other possibilites? And are there any games (roguelike or not) that do things like that?
I don't believe that a player needs to fear deep consequences of failure in order to enjoy playing a game. While some players may thrive on that fear, quite a few successful games incorporate saving and checkpoints. With saving, players can be presented with a series of very difficult challenges and feel accomplished at each stage of progress. I would question claims that none of those games are fun.
But for a roguelike, if you remove death then your game is changed so that the player doesn't need to replay any of it. For a roguelike, this is a problem. Instead of hand-crafting and perfecting a single playthrough of the game, a roguelike attempts to make multiple plays of the same content interesting using randomly-generated content. If players complete the game without replaying any of it and have no incentive to replay it, then why even make a roguelike? Why not just build each level by hand? Any alternative to permanent death should address this, and should also focus on making failure feel less punishing to the player (which I'm guessing is the reason you're considering alternatives in the first place).
I don't have a flawless answer, but here's two random ideas. Maybe something here will get ideas flowing for you:
1) The simplest way to avoid death is to not create a game where you can die. If player death is not a feature of the game, then every action in the game can be permanent, and the player can continue to play until the game is finished. Vanguard suggested something along these lines when he said, "your character survives but the town he was supposed to defend gets destroyed." That comment might mean that the game plays like any other roguelike, except when you "die" you get a red mark on your final grade. Or it could describe a gameplay mechanic in which controlling or preserving towns progresses the player toward success in some way.
This concept is similar to restarting a level when you die. You don't lose all your progress, but you fail to progress toward victory. The difference is only in permanence. The town the player was meant to defend is now burning embers on the map, or maybe it's an enemy-controlled fort. In this example, the player might then be forced to find a new town to serve his purpose, encouraging exploration of more randomly-generated content without requiring a restart from the very beginning of the game.
2) There is a children's game called Telephone. In this game the first player whispers a phrase into the ear of the second, who whispers the phrase into the ear of the third, and so on. The last player hears the whisper and announces the phrase. Invariably people will mishear the phrase and whisper something wrong to the next person, and by the end, the phrase is completely different. What makes this game interesting is that failure creates fun. If everyone always succeeded, and the last player always repeated the phrase exactly as it started, then the game would be terrible. Instead of punishing those who fail, the game's enjoyment comes from seeing how the players' actions caused the outcome.
This principle might lead us down countless paths of roguelike design. How can player failures create fun in the game? Many existing roguelikes allow the death of a player to affect the player's next playthrough. But what more can we do? What if failing resulted in your character's items being randomly switched around? Or what if failing altered the player's path through the world itself? We might imagine a game whose path to victory appears straightforward, but upon failure that path is closed, and the player is redirected through corridors that they never knew existed.
I've occasionally thought about a game which uses some of these ideas. In this game, the player would control a diety-like character who moves throughout a randomly-generated world, attempting to accomplish a randomly-generated goal. The player would have no fear of death, but their actions would affect the various NPCs throughout the world. When the player's goal is finally accomplished or failed, the final state of the various NPCs could be inspected to see how your actions have affected the populace. I don't know whether this vague idea could become a fun game, but I will like give it a shot at some point.
Anyhow, maybe I've been rambling about nonsense, but maybe something I wrote here will give you an idea.