I've seen and played under DM's who have the Hackmaster, "I'm not doing my job unless every session has a TPK." I don't care for DM Fiat when it comes to those DM's.
However I think in most cases I support the fiat. Especially when it helps move the story along. While I don't think it should be done to the point in which it tickes players off, I tend to follow the school of thought used by Nathan Rice's character in Gamers 2: Dorkness Rising.
"Story trumps rules."
Though I will add that if you do someting drastic (say take away a cleric's power during a massive encounted like the film), you should also be willing to flub the rules to let the players live.
I also follow the idea that character's don't die (at least permanently), unless the DM allows it.