Honestly, why should you get to make so many mistakes? How long do you want to drag out rock-paper-scissors?
I think each FG relies in part on guessing right and punishing wrong reactions ( = guessings, too). If you have fewer guessing opportunities, the game gets more random. Say you can throw a D6 ten times, you have a better chance to recover from a thrown 1 and still get a high score, than if you only have one or two dice throws in total before the game is over.
If you know you're opponent will lose a round in a few seconds time due to having received more damage than you you can easily wait for him bringing the fight to you. The leading player doesn't risk anything for waiting, there is absolutely NO punishment for playing this way and the reward is winning the round. Such a situation favors the (health-)leading player who just steps back and let the desperate opponent try to reach him and risk punishment or simply being evaded. Isn't that an advantageous position in DOA?! The shorter the time the higher the incentive for that kind of play (which style I find boring).
No one has given any reason against it other than "no."
Darn! Sorry that I didn't come through to you. I was so sure that my comment in fact did contain more substance than a simple "no" (for example, rephrase "Why increase the relative penalty for one wrong guess" to " You increase the relative penalty height for one wrong guess and I fail to see a merit in that" and you've got my reasons). Ah well, your mileage may vary...
I can understand your desire for wathcing constant, decisive action. But IMHO your proposed cure is worse than the disease. That's not what I like in a fighting game.
Maybe an example makes my point clearer: I like watching chess games on the internet. And watching bullet chess (1min per game and player) is pretty fast and intense - and IMHO mostly garbage. I've seen GMs losing full pieces by pre-moving and being tricked by cheesy in-between-moves. It's a total different game requiring a very different skill set than that required for "slow" chess. I prefer the good, old chess skill set with deep calculations so much more. So I stay away from such fast chess transmissions. If chess would be restricted to bullet or lightning chess I would loose all interest. Even if there are many people enjoying a speedy game of chess and I know some people lack the patience for a 10-minute-think over one single move, the speed requirement changes the game into a different, lesser thing. Just like a soccer game which is restricted to 10min duration is not a real soccer game. I prefer the longer versions (including long DOA tournaments).