Speaking as the admin of a small (4-10 people) server, I keep the option off - and will not use anything like gravestones - because I have seen what happens when you do not. People get much more laid-back around hazards, and then when they lose other things to death (like CC abilities), they start asking for refunds. And then they complain when you tell them that getting sucked into a jet engine is not "the glitchy MC movements" or lag, but their own fault. That and how people start doing things like "I could fly back to my base, but that takes effort. Time to suicide and keep my inventory instead".
And now that I have it off, I have constant requests - often aggressive - to turn it on, "because Minecraft isn't about punishment".
It has gotten to the point where I have a hard time respecting that option or its use in a survival environment.