by HolyGigi
We can ignore this rules for the sake of discussion, but I dont see how it can help you win.Yes, -10 or so threat is nice, but you will still have all the enemies engaged, you still have all the locations on the table and you are only generating 2/3 of your starting income. Add all this to the lost ability of the hero and that 10 threat reduction doesn't seem like much anymore.
I now have about 35-40 games (core set + all mirkwood ap + khazad expansion) and I can count on one hand the number of games I may have won if I reduced the threat after a death. On some quests, especially late game, a dead hero isn't the end of the world. Your allies are doing all the questing and combat.
What is really bad when a hero dies, is that you are losing all the attachments it has - this includes quest objectives.
Also, thematically, while I understand your point, for me it doesn't make sense to reduce the threat. Since the goblin band killed one of my heroes, they wont stop pursuing me. Quite the contrary, they get into a bloodlust rage (or hunger) and they try to finish the job.