But apart from the /facepalm moment, there is an interesting aspect to the story: It ties in with my recent post on playing for fun versus playing for advancement. If the main motivation of a game is advancement, losing this advancement is a game killer. But if you are playing for fun, you could have as much fun after a restart! Just think of games like Civilization, which you would also restart after having won (or lost) the previous campaign. You keep playing in spite of losing all your previous advancement, because playing the game is fun.
Apart from the fact that I don't currently play World of Warcraft (except occasionally on a free trial account), I would consider advancement not my main motivation for having played WoW. That is, if Blizzard would write me tomorrow that sorry, they lost everybody's character data and we all have to start from level 1 again, that wouldn't make me want to play WoW any less or more (although the opportunity to level up with friends might be fun for a while, not that such an activity is well supported by WoW). That could be because I'm not much of an Achiever player type. Or it could be that my WoW achievements are in my head, where a deletion of data on Blizzard's servers can't erase them. I made friends, I've seen the world of Azeroth, I faced Nefarian in Black Wing Lair back in vanilla, and nobody can take that away from me.
But I don't think there are any MMORPGs other than A Tale in the Desert which would survive a character data reset. And that isn't limited to MMORPGs based on levels. I doubt many players of EVE would return after all skills and ISK would reset to zero. And the speculations about a partial reset in Darkfall weren't exactly welcomed by the players either. World of Warcraft, Lord of the Rings Online, City of Heroes/Villains, Age of Conan, Warhammer Online, all of these would lose the majority of their players if all characters got deleted by accident or design and everybody would have to start over. Character advancement is the major motivator for MMORPGs, and taking that away is lethal for the game.