On one side people lament that towns are empty after a few dragon attacks, on the other side people lament unkillable characters
Aside from this game bug (not being able to dispatch the officers in the legion/stormcloack camps) I think Bethesda should have balanced things in a different way because, as is, people are unhappy either way.
But people dying from dragon attacks is from another flaw in game design. As soon as a dragon shows up EVERYONE tries to kill it. The blacksmith, the alchemist, the kind young girl who wants to become a merchant all become bloodthirsty lunatics as soon as an enemy shows up. Guards should attack dragons, the Companions should attack dragons, soldiers should attack dragons. The peasants, the thieves, and the other random bad guys should flee.
But as people have said, just make essential characters killable by the player only. It's easy to do, evident that there is already a mod that does it.