This thread proves that the "funnel" is just one of those wacky OSR ideas that has the potential for Epic Fail in actual game play.
That all depends what you mean by "Epic Fail" (whether you mean the concept itself is a failure, or that PCs can fail tragically, and that this is somehow a Bad Thing). This thread is but one of many, but what you will find is that most folks who've tried it absolutely love the Funnel. Of course, most folks who love it don't have a problem with the fact that failure is a very serious threat, and that characters can, do, and will die. The whole RPG itself is also categorically not built on the assumption that characters will survive or be coddled, or only face threats appropriate to their power. The Funnel helps that understanding.
It exists to drive home the huge difference between ordinary plebs and leveled members of character classes, it gets across the fact that heroes rise from truly humble beginnings, it generates interesting characters organically through play, and it highlights how dangerous and terrifying monsters and their ilk are to normal folks. 0-level play isn't D&D-style heroics, it's Call of Cthulhu-esque survival horror that acts as the crucible for the heroes your surviving characters will become.