Part of the current status quo comes from the fact that, when given anonymity, people turn into real jerks. They gank, they insult, they act like little children. If you let players kill important NPCs or creatures and they never respawn, you're going to end up with a lot of upset people. But this respawning of important characters almost makes the players do it more, because they know there is no repercussions for their actions. They will not be hunted by furious players and the world will not have changed because of their awful deeds.
The other side of this is to have no respawns. But they you have entire outposts of slaughtered people, no ability to do anything outside of player interaction, and a lot of people no longer playing your game. If every valuable NPC didn't respawn, you'd have a dead MMO, ruined by the jerks who love to do that sort of thing. This is only one of the two extremes, though. There is a middle ground.
EVE Online is one of the MMOs that sits on the middle ground because player choice and player consequences are balanced. In normal space, it plays much like a normal MMO. You can't really destroy factional stations or do incredibly destructive things. However, in the dangerous world of 0.0 space, stations are destroyed all the time in the wars between the different alliances. This works for EVE as it has a very heavily player-run economy, but it doesn't work very well for other MMOs as they do not have the player-run system that EVE has. So what's another choice?
The other form of middle ground is a minor change from the extreme of having constantly respawning NPCs, but this minor change can make a big difference. Make it so that new NPCs are generated from whatever the main faction city is and walk or travel to their location. Make it so that the names are procedurally generated, so when you go into town to buy potions and the potion-seller has a different name, you know that somebody took the time to eliminate him from the game world. This sort of persistence would greatly heighten the feeling of affecting the world and improve things overall.
In the end, much like choices themselves, it comes right down to personal preference. Whether you play somewhere that has towns wiped from the face of the game world or consistently respawning baddies, it's up to you to choose and decide whether you want the constantly shifting world or the static, familiar one. And no choice is wrong.
Each week James Murff writes Under The Hood, a deeper look at MMO game mechanics and how they affect players, games, and the industry