I have thought about this and struggled with it as well.
The problem I have run into with adding the word draft (which I have done before) is that it causes the menu to not actually look the way it will if the content were published, for example it can cause the menu to spill onto the lines it wouldn't normally.
I see the value of both highlighting things as drafts and not
highlighting them. Not pointing out drafts allows you to see exactly
what users will see if you publish the drafts. Highlighting drafts in
some way makes it much easier to keep track of what users are currently
seeing and what is a draft.
I just had an idea which is mark drafts with two css classes, one that simply identifies it as a draft and one that applies styling to highlight it as a draft. Then we could add a button in the top left by Admin and Logout, maybe Toggle Drafts, that when clicked would toggle the class that actually styles drafts on anything that has the draft style. That way admin users could see exactly what end users will see when they want and have drafts highlighted when they want. I think the default would be to have draft mode enabled. Mezzanine's css could apply some basic styling for the draft style class and then any project would be free to implement their own.
Hopefully that made sense. What do you think?