I don't think a limited lives structures is necessarily a good idea for many modern games (especially story driven ones), but more incentive to not be awful would be nice :p
I love the system used in the R&C games. During your second run you gain a bolt (the games money) multiplier as you kill enemies, reaching as high as x20. However, if you get hit even once it resets to x0 and you have to start building it up again. The only way to afford the special second run weapon upgrades in a non-raging inducing amount of time is to maintain a decent multiplier.
It didn't necessarily make the game harder, but as a kid it sure as hell made me play more carefully. Such a simple feature that adds so much intense action to a story you've already completed.
