Seems like everyone in the OSR is debating whether or not 1st level characters in D&D "suck", and I have a few things to say about that.
Heroes ought to be just a cut above the average joe to start out. The necessary resolve it requires in a person to have the guts or be crazy enough to risk their life on a daily basis fighting monsters and braving trap-filled dungeons simply necessitates it. The ability to swing a sword well, pick a trapped lock, or even cast simple magic spells automatically places the people who can do these things a cut above the rest of the general population of smithies, farmers, and merchants.
First-level characters do not suck. They aren't awesome enough to face down the Balrog yet, or cleave an orc cleanly in two, but they'll get there if they're lucky and smart.
This is one of the reasons I'm enjoying Microlite so much. PC's aren't easy to kill unless they do something really stupid. At first level they can stand up to several encounters before resting, but the threat of death is still there if they're not careful or smart. They can handle a mess of goblins and with good teamwork overcome tougher monsters as well. Saving throws are still hard to make, but not overwhelmingly so. My kids have never felt like they "sucked", even when they have to run away. Maybe that has more to do with their complete lack of experience playing at higher levels, but I think it's also built into the system at-large. In a word, it works.