I think that the debate over "dead is dead" vs. "dead just means you have to switch bodies" boils down to player preference.
The debate over whether it's "right" is a debate over play style, with some elements of outrage about "other people having fun in the wrong way."
In multi-player, I can see advantages to having it both ways, but the decision should be up to the mission builder and/or server operator.
For offline, it doesn't matter at all. Just check the appropriate difficulty settings boxes and have fun.
Obviously, "dead is dead" is more realistic, but only if you are attempting to simulate the life of a particular crewman rather than the life of a particular plane crew, or even a particular squadron.
Really, it's a technical issue as to whether the IL2 game engine will support a change to "dead is dead" and whether making the change is a priority for TD.
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