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Actually, the lost HP comes from Demon's Souls. I wa sokay with it since you can always reset that HP back with humanity.
Still, I think it is fun to be totally destroyed by a game, so long as you don't perceive that you've been cheated out of valuable time for it. For example, I'm fine getting killed in Ikaruga since the run itself was quite fun. I'm fine being beaten by a better Melee player since I'm actually still progressing skill-wise. When I recently tried Fire Emblem Heroes and saw the stamina system that limits how long you can play the game, losing in that game is infuriating. Losing means that not only you didn't make any progress, but you are blocked from making further progress for quite a while.
Furthermore, there's also the skill factor. A loss must be felt as if they were deserved. For instances, in Mario Maker stages, all obstacles must be seen in advance. You can't have leaps of faiths. If you can't see the platform below, you got to have a trail of coins guiding your jumps. I think level editors are a nice way to learn about balancing difficulty.