I am not saying that it is bad to have a character killed off in a game, it allows the story to evolve, and really the only reason why I play, and I would say the same for the rest of the group. I have had characters die off in the past, and it makes you sad, especially after all the time and love you but into developing a character, but if it can go into the story to make the story better, then there is nothing wrong with it. However, I think it is truly tragic when all the characters die at once thus ending the story before it really begins. I would say that if there was ever a time to fudge the rolls, then that would be it, or to make the game more intresting.
The campaign we started after the massacre of the characters has got a huge potential and looks like it will be a blast. If the gm didn't really want to do that campaign then that's one thing, but to throw away good material is quite another. It's kinda late now to go back, but don't throw away great campaign material just becuase of a few bad rolls (in my case and the other player's case) or a few great rolls (in the gm's case).