In Morrowind there were essentials, they could die but it said an essential died and recommended reverting to a save game. I liked that system better. Becasue you can just reload, I think everyone should be killable.
I think you're right. Everyone should be able to die. The only problem is, with all the realism and scheduling that the new creation engine gives to the NPC's in Skyrim, it may become too unpredictable to know whether an NPC is gonna live happily in peace, or be blown to crap by a dragon who just happens to [censored] a town.
Yes, it does allow for more realism allowing the essential NPCs to die by any means, because it allows the player to learn from mistakes, and perhaps make way to protect certain people. But the only reason it worked so well in Morrowind was because people never moved. They walked around a bit, but they never left their homes. They couldn't walk through doors. And they couldn't really fight very well against, say, a winged twilight that happened to follow me to a town.
In short, it's a good idea, but there are going to be too many variables for it not to be annoying when you get a random message appear that someone important has died, and you need to reload, when you're miles away from them, and you, potentially, haven't even met them yet.
Although, to counteract my own argument there, the new radiant ai system does allow for fail-safe's, right? Like when they talked about if you killed a shopkeeper, then a few days later. the widow, or sibling of that shopkeeper would take over the shop, as a way to continue the flow of gaming and economy. So maybe, for quest characters and essential NPC's, there could be a person that steps in for them if they bite the dust. Someone who 'assumes' the role of essential to keep the quest flowing smoothly without breaking the game apart by forcing you to reload. Maybe...