Losing is a bummer in itself, I think. If you really need an extra motivation to not lose then there's something missing from the game or it's way too easy. Besides, it depends on the genre. Personally I find the system from Dark Souls the most endearing, because even though the game's difficulty is punishing, at least it gives you a chance to remedy the situation by recovering lost XPs (that is unless you fell from a cliff like an idiot). However, I can't see it being implemented in, say, Call of Duty because it's a game that relies heavily on fast paced setpieces.
I agree that the nemesis system is really cool beacuse it adds a lot of depth to the game world, but gameplay-wise it could really use some tweaks. Specifically I'm talking about the fact that the game pauses every time you encounter a captain. It gets especially ridiculous and frustrating when you stumble upon several captains at a time. Not only this leaves me with massive blue balls from interrupting the heat of battle, but it looks kind of stupid when everyone stops dead in their tracks only to listen to some dude repeat one of the several taunts ad nauseum. Also, getting mocked by the enemy who has defeated you only makes me want to launch my TV through a window.