IS ALL CAPS EVER OK?
I'm recreating a Character Sheet for an RPG, but it might as well be a form. In the original sheet I notice that all the text is in capital letters. At first I thought it was in small-caps, but it isn't, it is in full capitals. It has the same letter height all the way through. Is this a good or a bad example of design? Should all caps be used for certain types of heading?
All caps is a common and always acceptable setting for headlines, titles, main heads and even subheads in some cases. Form field labels are titles, and uppercase works fine.
In your example, the uppercase enhances the clean look of the form, helps to quiet the page and creates crisp little rectangles that help guide the eye. Using title case would be okay, but the form would definitely look busier and the labels would lose the air of authority that helps make the page feel organized, so in this case I would say the choice of uppercase is appropriate. Note the designer's good choice of point size and weight: small enough not to crowd the space between the rules (just about lowercase/small cap size, in fact), bold enough to have authority.
Setting text in caps conveys importance or emphasis, similarly to italics, boldface and underscore. It speaks, you might say, with a louder voice. That's why, in the netiquette advice columns, you'll see it referred to as the net equivalent of shouting. (Back in the ASCII-only days, we didn't have sissy text frippery like bold or italic, so SHOUTING was the only practical way to tick everyone off.) So, while you wouldn't set paragraph text in uppercase (or all small caps -- same thing), there's nothing wrong with using it where you need a stronger voice on the page.
All caps are certainly OK. The key is to use them sparingly rather as the norm. Use them for contrast.
As text headings? That could work. For setting pages of a novel? Avoid that.