To be honest, the entire damage system is going to get a complete rewrite once we have nailed down BotLab physics. At the moment, we are working on getting BotLab robots to fight each other. Once this is working, the order of priority will be:
1. Make sure BotLab robot vs BotLab robot combat physics looks and feels good, with a minimum of physics "explosions". (physics)
2. Make the damage system feel good. (game design)
3. Make damage look satisfying. (art and sound)
The damage system that currently exists is effectively a placeholder -- I am expecting the final version to look and feel different.