Yeah, but the outcome of the main quest should be different if you kill everyone, I just used Morrowind as an example where you *could* screw up. Also "punishing" is not a concept that should be employed. Incentives should be given for characters who don't die, rather than punishing those that do. It may sound like "dumbing down", but the reality is that most "punishments" in games are cheap and annoying more than anything. It's enough if you have to go and resurrect characters at the GY.
I agree the outcome should be different if you commit genocide, but you should still be able to beat the game, unlike with Morrowind. Either way, where you fail if you kill a main character, or if there's always a road forward because everyone keeps journals in their pocket, it can feel a bit contrived and immersion breaking, but I'd prefer the latter.
I think we can have both the stick and carrot for death. Sure, punishments can be annoying, and it's a hard balance between trivial drawbacks and punishments worthy of reloading, but I'd rather there be even a minimal, tangible drawback to death than nothing. But rewarding people for never dying is also a good idea. So 3-4 deaths in a game wouldn't punish you much, but you wouldn't get any sort of reward, but dying over and over again or never dying would have more drastic effects on your character, perhaps mostly in an intangible way.