Challenge vs Frustration: Bloggin' on Time Limits

Obsidian's co-founder and chief creative officer Chris Avellone has penned a short blog post on time limits in games and how to do them right, which uses Fallout 1 and System Shock 2 as examples. Here's an excerpt:
So I love time limits. In Fallout 1, it was appropriate because:

- It reinforced the urgency and pressure of saving your Vault.
- It reinforced the brutal nature of the world you were in.
- It made time-usage skills more risky for players to use. Sure, Doctor was helpful, but you had to be careful because it could consume a lot of time if used repeatedly.

Players reacted negatively because:

- The time limit was unforgiving.
- It prevented them from exploring areas at their leisure, which undermined the non-linearity of the game suddenly you didn't want to go everywhere and explore everything, because the clock was ticking.
- It couldn't be reset/extended beyond the time limit except in a few places in the game, and only a finite number of times.

So the question becomes if I, as a game designer, want to introduce the same level of time pressure and instill the player with a sense of urgency, what can I do?

System Shock 2 had an elegant answer to this: It associated all the time limits with your inventory items. If you powered up an implant, it had X amount of time to function before you needed to recharge it.