I was semi-devastated when it happened, but it did encourage me to play Hero mode right away.
No, they should use the OoT3D system in the menu that you can choose if you wanna play Hero Mode or Normal Mode.
A lot of games need to be beaten in order to unlock "Hardcore" mode, so I think that's the feel they were going with in SS. I would have chosen Hero mode first, yea, though after playing it in normal mode first and getting to know everything, Hero Mode was ridiculously EASY fro me. Not really sure that's what they were going for.
Here's how I see it: If you want your hard worked on file deleted, YOU'LL DELETE IT YOURSELF!
Granted, if it did create a new file and I beat Hero Mode, I would have deleted my other save anyhow. Just nice to know you have options I think. It was a shocker to just see everything GONE but, yea. Not like I didn't get it all back anyway. Motivation to replay perhaps? To reclaim what you lost?