The most far-reaching bad descisions in RPG design?

[the OOD]

I would like to nominate XP for Killing. This tends to apply most to later D&D and it's derivatives but plenty of RPGs assign XP values to monsters and the natural inclination to the players (and the GM) is to translate this to XP received for killing it. This even carried over to CRPGs as the primary advancement system. Early D&D used XP for gold and other systems like Dungeon World or Mouseguard/Burning Wheel use XP for (failed) actions, and those systems both in my mind encourage a much different and much more interesting game.

this is big enough that I forgot what I came in here to post. yes. this.

an interesting aspect of Universal Decay is that gear and powers add to you level for XP purposes for everything but RP, so your indestructible Juggernaut is relying on roleplaying xp for (at least)70% of their xp. this has promoted fantastic player behavior for everyone and works really well overall.