- There should always be events that can cause permanent, violent death to a PC. It's supposed to be an RPG, not some kid's game where the heroes are all immortal. Without risk, there's no stakes - and it's impossible to roleplay fear or take threats seriously. If the evil ultra lich /won't/ eradicate some PCs, then why should I fear him? At that point it's just make-believe without stakes.
- Permadeath should be a possibility, and more frequent if an event is more dangerous - but players should be warned at least in character that this is a likely outcome so they can make informed choices about wanting to be part or not.
- Participation should be up to players, but not whether or not there is a chance of death.
- Before deciding to have no permadeath events, make sure you know how much less fun events are when there are no stakes or real, permanent risks. Losing a character in a heroic event gives that character meaning and completes his story - it's a perfect chance to try out something new after.
- Permanent death should be relatively common so as to maintain the integrity of the world. If players can simply say "nuh uh, I didn't want to die" it takes the entire stakes & integrity out of roleplaying and leads to, frankly, boring characters and an even more boring world.
- Characters that never end are almost impossible not to be boring, though it can be done. Not ending characters counteracts roleplay - a story has a beginning and an end. A soap opera that never ends is fun only for a very small segment of the population. Knowing every event is 100% is not fun.
- In my opinion, you should never be in control of your character. Or rather, your control ends where other characters begin. Your control extends to the choices your character makes, but this does not protect you from the consequences of these choices. Without (possibly fatal) consequences, the act of adventuring has no meaning. I cannot even imagine a pen & paper group where your characters can't die. What'd be the point? Why even try to stay alive if you know the DM won't let you die? Why risk anything ever if risking things is no different from not risking things as the outcome, survival, is known in advance?
This is a game, and not meant to be like real life. In this game, I want to be able to be bold and do things that are dangerous, things that could kill me in real life. I want to fight and enjoy conflict against cunning monsters and players; I want to face death and lose a lot, so I can savor that one time in a hundred where I come out on top.
"That being said, what should be grounds for permadeath?"
This is a good question so I will give the answer I personally like. Permadeath should be the consequence of any and all PVP conflict, so as not to cheapen the death (though here, this is an unpopular opinion.) But that's not what you asked; you are talking about quest & DM quests. On mechanical quests, permanent death should never be a possible outcome unless you are warned ICly or OOCly of the possibility before you take the quest. The same is true for DM quests.
When is permanent death fair game on a DM quest?
This really depends on what tone a DM is going for. How much desperation / oppression do you want to convey? How dangerous is the antagonistic force? Generally speaking, permanent death should not be overly common on DM quests, but should always be a looming threat for people that make exceptionally stupid decisions. Much respect to them if these are made to remain in-character -- something others tend to remember. I think I agree with the stance that it should be mainly for things on the more 'intense' side -- such as fighting a powerful dragon or lich. But there could be other circumstances: remaining stranded on a different plane (a cool retirement!), becoming enthralled to an aberrant, having to draw lots and sacrifice a party member, or, more interestingly, an evil entity offering you a chance to avoid fighting their minions if the party slaughters one of theirs in front of them, sith-style. Those sort of things make the world come alive and ensure actions have consequences. These are intense, memorable endings and far more preferably than living a boring life.
I don't think a death against some random NPC monster you fight on the way should ever be permanent unless it's a truly epic, server-changing quest and you, say, have a very serious IC reason for it -- for example, you're on a ship and it is sinking and there's no time to lug a body. But even then, there should be some leeway - if a player risks dragging the body anyway, he should have that chance.
So essentially, it should be there when it doesn't make sense not to be there. There's nothing that makes me unhappier than when one shies away from permanent death just to 'protect someone's feelings' -- if you are so attached to a character that you can't stand the thought of losing him, I think you're too attached. That's maybe a strong statement but I stand behind it. You should never be so attached to your character that you aren't willing to risk losing him doing something cool.
Permanent death events/chances should be opportunities to go out doing something Awesome.