Gamasutra currently has a pretty interesting interview with David Cage, where he discusses, among other things, the development of Heavy Rain — its successes, its failures. His observation that Heavy Rain had to completely do away with 'Game Over' situations was perhaps the most interesting for me, mainly because that was precisely what I felt made the game so compelling.
"I think my goal in Heavy Rain was to kill death, in a way — was to kill Game Over," claimed Cage. "So, I started thinking, "How can I get rid of Game Over situations?" Because in the context of storytelling, having a part where you die and you need to play again — the same bit of story, the scene — doesn't make any sense. It becomes really boring.
"So, I really had to find solutions to say, "How can I get rid of Game Over situations?" and the first answer was to say, "Hey, why not have four different characters, so if you lose one, two, three, or four, it just alters the story one way or another, but the story carries on." This is just what I tried to achieve with Heavy Rain. And yeah, the complexity came out of this, but I think people enjoyed it."
The whole permadeath thing worked so well in Heavy Rain, mainly because of the conversations afterwards: how did your game end? Did 'X' survive. I probably had more fun talking about Heavy Rain than I did necessarily playing it. That's not really a criticism, just an observation.
If you have time, it's well worth checking out the entire interview.