I found it annoying in Oblivion just having to take 1 hour cat-naps in order to level up.
Eating and sleeping can add to the immersion, but should never be compulsory. I agree that the best method is to revive health/mana, but allow for other ways of doing the same thing (e.g. potions).
I'm sure I remember playing an RPG that forced you to eat and sleep (or starve to death/die of exhaustion), but I can't remember what it was, just that it was annoying. Maybe one of the ultima games? Mount and Blade forces you to eat, or at least provide food, but that was part of the tactics neded to manage a large army and fitted neatly ino the game (do I have enough food for my campaign? Do I have enough gold to pay my troops?).
Edit: Oh yes, it was Ultima Underworlds 2 (only older gamers will remember that one). Awesome game apart from the food and sleep thing, but at least you could learn a 'create food' spell. And who could forget "Rat on a Stick"
Edit 2: Riding horses would be awesome too - as long as it was better implemented than Oblivion did! (again, try 'Mount and Blade' to see how to really handle horses in a game).
