It can definitely be frustrating if you die a million miles away from your spawnpoint, or if you just die in a difficult spot (like during a boss fight), because the enemies will still be there when you get back.

It happened to me once, and it was not only during a boss fight (Elder) but also a long sail away from my base. In retrospect, I should have built a temporary hut on the island where the fight was going to happen before making the sacrifice. I was way too cocky and confident, and paid for it.

The skill loss is arguably worse than losing the items, at least in some situations.

All that being said, I get why it's in the game and I personally don't have a problem with it. Preparation is key, and although it's not possible to prepare for everything that can kill you having small outposts, portals, or both around your explored areas goes a long way.

TL;DR: I can see why some players really hate the system, as it can certainly be extremely punishing, but in my opinion it's fine the way it is.
(At least until I die in some remote spot swamped by draugr elite and 2-star skeleton archers... )