Josh, why do you insist on saying that I arbitrarily kill characters when I DM? I've never said anything even close to that. Repeating it like a mantra, so you can make a point concerning a false-hood, still doesn't make the false-hood true. As I said, in the game I just completed (which lasted three years), not a single PC died until the 'final battle' (even though the party had magic enough to raise dead). No deaths for three years? Yeah, I'm killin' them PCs left and right.
Your Black Box theory is true in some games, but - again - doesn't have anything to do with the way I run a game. I've never arranged for players to have to pick between choices with one being certain doom. I don't arrange anything. I just create a world with monsters of varying strengths and let the players play in that world. Very un-rail-roading, the players choose their own path. If they are smart, they live. Like I said, the last group was smart. 'Smart' simply means not foolish enough to take on anything they have almost no chance of beating. Anything that is powerful enough to be a major threat they will almost always know about prior to encountering, so 'smart' really just means 'not stupid'.
In your test, you forgot the final choice
E. Run.
It IS ALWAYS an option.
Besides, the example doesn't really work when the players decide what directions they go it, because the choices are nearly unlimited.