I'll answer this in two parts.
First: yes, Ultras can die. Main characters never have, but we have seen permanently dead ultras, such as the Ancient Giants of Light who appeared in Tiga.
Second: why don't they permanently die in-series? For one, it's a kid's show at heart, and sometimes it pushes the boundaries of what violence is acceptable as such. Killing the hero permanently would be needlessly dark.
Then there's the symbolic nature of the Ultramen, and how they've always been a sort of Deus ex Machina in their own right. For instance, King saving Leo in Terror of the Saucer Race Series - The Life of Leo! The Miracle of King! was obviously a Deus ex Machina, but fit because Leo was said to represent the life of the earth itself, who was literally not allowed to die.
Everything Tsuru said was right too. Gotta sell them toys :D