I think it makes sense because death/fainiting overrules all other temporary status ailments. From a balace point of view, do what others have already said (curing death is more costly/inconvenient that curing only blindness) or make killing your own party members/suicide harder.

With the 3.5 D&D example:
* True Resurrection doesn't have the level or constitution loss, and at these levels, lower level revival spells aren't worth considering. (Also, 3.5e doesn't penalize constitution unless the character is level 1; instead, the character loses a level, and with XP awards working the way they do, this penalty goes away after a while.)
* The material component is irrelevant thanks to an epic feat that eliminates that requirement.
* In 3.5, Heal is limited to 150 HP healed, and Mass Heal is limited to 250. With an 8 character party (rather large, I know), that's a total of 2,000 points healed by Mass Heal in optimal conditions; at extreme epic, characters can have much more than that.
* Trur Resurrection has no limit to the amount of HP healed, making it a better choice for out-of-battle healing, provided you can easily kill the character off. (For example, the character could willingly choose not to resist an instant death spell.)
* Epic spellcasting allows for full heals, but many dungeon masters ban it, as it has many balance problems of its own. (For example, it uses the skill system for something important, and the skill system is not meant for that sort of use, especially since the rules let you easily make items with +10 or higher bonuses to skills, and that's at pre-epic levels.)

Incidentally, an interesting case comes up in Final Fantasy 5, where there is a combination of two spells that will solve your MP problems:
* Transfusion (Blue): For 13 MP, this spell kills the caster, but restores all HP and MP to the target (who must be alive; can be the same as the caster, in which cast the caster ends up dead with full MP).
* Phoenix (Summon): For 99 MP (or 50 if you equip a Gold Hairpin, wnich might be a good idea), will revive a character with full HP and MP, and will also do fire damage to all enemies. (Note that this spell can't restore MP to a living character, unless you're playing the GBA version and that character is a Necromancer or has the Undead ability (learned by mastering Necromancer) equipped.)

So, Blue Mage casts Transfusion on Summoner, Summoner summons Phoenix to revive Blue Mage, and both characters get their MP back.

(There's also an ability that costs nothing to use that revives all dead characters with full MP (but not HP).)

Does it REALLY matter? Most of us play a game to escape from the real life, have something to relax with, or just for fun/entertainment.

For a non-hardcore / non-masochist I would actually say that when you die, AND IF you get back to life (or starts in a new world) you start with a blank slate or blank page.

Effects are thus re-setted and the main stats remains (or as I call it the "essence" of that character).

A non-hardcore player would not want to start over on death, but would prefer to be able to continue after a death with minimal time loss; otherwise, the game just becomes frustrating and rage-inducing when the player dies. Games that are rage-inducing are not what you want to play when you want to relax.

Case in point: The Ice Cave in Final Fantasy, which is rather infamous for having some unfair encounters. In the NES version, if you get unlucky, you have to start the entire dungeon over, which is incredibly frustrating, as the time you spent is wasted. In the PSX version (Origins), however, there is a memo save that can be used in dungeons; if you get bad luck and get wiped out by an ambush, you can just reload the memo save and continue as if nothing happened.

Also, in the games I am talking about, there are multiple party members, so if one character dies, another character might be able to revive them, so the questoin does come up. One character's death does not end the game. (It doesn't really come up in Final Fantasy NES, as resurrection can't be cured during combat, and the only statuses that doesn't go away at the end of combat are poison, stone (which can't coexist with death), and death. In case you're wondering, status ailments do persist after death in battle, as can be evidenced by the fact that characters can still recover from them.)

Well, they say death cures everything and contrary to TinyE, in my experience, no person I ever killed complained about any ailments afterwards.

Balance wise I think it depends on the easiness of resurrection. When it is easier to cure death than to cure blindness in a game, then there's something wrong with the balance. Even in games with Resurrection, Death should be the most serious affliction. I.e. the most difficult to cure, resource-wise. Like in D&D with material components. A resurrection costs lots of diamonds. Lesser spells curing lesser affliction require much cheaper components or no components at all.

Theoretically, death being the end-all-be-all of ailments should require powerful magics to heal. Any other ailment should be cured by a resurrection spell since the healing power is immensely powerful, having to heal all contributing factors to death. Death doesn't cure all ailments, the act of healing death does.

Which still means that the 'cure death' spell should be the most difficult to pull off, since it includes all other healing spells.

There are some games where the full revive spell can heal living characters. Phantasy Star 2 and 4 (not 3) are examples, as is Baldur's Gate 2. There's also Rudra no Hihou (though such spells tend to be weaker than conventional healing spells, and I think they don't get a boost from the invisible stat that governs healing magic).

However, I am not aware of any game where the revive spell can cure status ailments on living characters. Anyone know of any such spell?

It might surprise you how often this is not the case.

In Final Fantasy 5, Raise (the basic revive spell) is ower level than Esuna (cures status ailments). In fact, Red Mages can use Raise, but not Esuna. (Raise is more expensive to cast, however.) Similar factors occur in other FF games; in FF4 (2D), Raise costs less than Esuna (though Cecil can learn Esuna but not Raise; on the other hand, Phoenix Downs are really cheap in this particular FF games).

In Wizardry 8, the revive spell is 6th level; there are some status ailments that can't be cured by any learnable spell except for Restoration, which is 7th level.

In The Dark Spire, it depends on alignment whether a character can get the party-wide Revive + Heal (not usable during combat) or the party wide Heal + Cure Status (usable during combat). Note that full revive spells can be used to heal living characters in that game, but can't be used during combat, and don't cure other status ailments, unlike some other healing spells.

I also note that, in D&D (at least through 3.5, don't know how 5e handles this), Heal is one level higher than Raise Dead.

I like how Pathfinder fixed that. In it, you don't lose a level. You gain a negative level (that you can work off, or remove with Restoration). This fixes the calculation issues of needing to remember what every level up brought, etc. In some ways, these "negative levels" are worse than losing a level, depending on the character. http://legacy.aonprd.com/coreRulebook/glossary.html#energy-drain-and-negative-levels

D&D 3.x is like that, except that negative levels can turn into level loss, an the revival mechanics skip the mechanic and just cause level loss directly.

Personally, I don't like having such a penalty for resurrection in the first place.

Permadeath has become a bit of a meme in the last couple of years, devs use it as a kinda catch phrase for "our game is so hard and badass", there's no reason why permadeath should always mean that the game is harder, most players will just reload a save before the fight if they lose a party member. I think it's a lore question, if resurrecting the dead is possible in the universe or not. Also there's the possibility of resurrection have permanent side effects like stat penalties.

Maybe it's a bit derailing, but I just remembered that the upcoming Copper Dreams will have an original way of dealing with death. You can reload your last autosave, or play on to see what happens when you are revived, which is likely to give you some kind of penalty, but can give you access to secret areas and boons as well.

I prefer the game to be designed so that the temptation to reload if someone dies is significantly reduced. In particular, having resurrection be cheap (or automatic after battle, which I have seen in a few games, including SaGa 2 and 3, as well as Paladin's Quest and its sequel) and not having any permanent side effects will remove the main reasons players tend to reload when characters die. (It would also help if dead characters would still get XP from battles, or if there aren't non-repeatable battles with high XP yields (some Final Fantasy games, including 5, 6, 8, and 9 (not 7), solve this by having bosses not award any XP).)

Permadeath is the sort of mechanic that I generally consider to be a dealbreaker when choosing which game to buy or play.

(Incidentally, it's worth noting that Final Fantasy 5 has one Blue Magic spell that can't be learned without a character dying unless you wait until much later, when you have Bone Mail, and at that point, it's a while before you find another enemy to learn the spell from.)

Death isn't always the end-all-be-all of ailments; there are some games where that isn't the case.

In classic Wizardry, ASHES is worse than DEAD; furthermore, LOST is even worse than ASHES. (There are ways to cure LOST in some of the games, but it isn't as simple as casting a spell, and if you return to town, the character is buried and deleted, so the temple can't help you there.)

In Wizardry 7 (and maybe 6), Stone is harder to cure than Death, and it carries the same penalties when removed.

In Final Fantasy, the spell to cure Stone is higher in level than the basic revive spell. (With that said, you can cure Stone with buyable Gold Needles, while in pre-GBA versions there are no Phoenix Downs to revive your characters.)

Final Fantasy 5 and 6 have a Zombie status ailment, which can only be cured by one specific item (no spell will work, and the only Mix that will work in FF5 requires two of that item). (Interestingly enough, some enemies in FF5 (including the final boss) have an attack that simultaneously inflects Death *and* Stone, requiring two actions to restore the character.)

In Bard's Tale 3, the Heal All spell can cure Dead but not Stone when it heals your party, and Old is also not so easy to cure (but doesn't prevent the character from acting, nor does it trigger game over). With that said, the spell to cure Stone is acquired before the basic revive spell, but it only heals one charater and doesn't restore any HP.

In Bard's Tale 1, Stone is more expensive to cure than Death at the temple, and there's no spell to cure Stone.

Might and Magic has all sorts of weird mechanics that can be misused to break the balance. For example, in MM6, there are a bunch of extremely cheap temples that offer normal healing for 2-3 gold per character. Removing status ailments and resurrecting costs more although it's very affordable. Get a character able to use Lloyd's Beacon (save a place and teleport there later), save a teleport right outside the temple, and you can full-restore your party for cheap. This makes Divine Intervention obsolete, since Divine Intervention makes the caster temporarily older by 10 years - there's no reason to use it if you can teleport back to town and do the same for a handful of gold pieces.

Usually, there's no balance problem with death removing all ailments because it's generally harder to resurrect a character than clear ailments. In most classic RPGs, any healer who's able to raise the dead was able to remove ailments several levels ago.

I generally prefer how newer games handle conditions and ailments via the MMO standard introduced by the original Guild Wars (the greatest MMO ever). Conditions and curses generally have a limited duration; some are implemented as environmental effects that end once you step out of them.

I absolutely hate permadeath and refuse to support it as a design paradigm. Permadeath is inherently a self-defeating mechanic anyway since people who don't want it will load an earlier save file. Some games are specifically designed to prevent that, although this only presents another inconvenience and obstacle to people who know how to back up save files or prevent them from being overwritten. In the most extreme case, someone obsessed with removing permadeath from a game could run it in a lightweight VM and use saved VM images for ultimate control over when and how the game saves.