Permadeath on of course.
I've been playing Shadow Dragon recently for the first time and it's OK but definitely has some flaws. The story isn't too interesting; likely a result of being a remake of a game from back when game writing was even worse than it is now. I'm on chapter 16 and every goal has been kill the boss and seize his spot. The gameplay is still fun and reclassing was a neat addition.
I've played all the localized ones and an English patch for the first GBA one and Rekka no Ken is my all around favorite entry.
Yeah, I would always have it Perma Death on.
And yes, Shadow Dragon is my least favorite Fire Emblem game, which is saying something.The story was alright. Not as deep as the others, but it was a good first games from this series.
As for a favorite, Sacred Stones would probably be it.